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FCA unveils plans for coming year highlighting four target areas
The Financial Conduct Authority (FCA) has outlined its four key areas of priority this year, which will garner further investment and increased resources.
In its business plan for the coming year, it said the four areas are putting customers’ needs first, preparing financial services for the future, strengthening the UK’s position in global wholesale markets and reducing and preventing financial crime.
The announcement forms part of the firm’s three-year strategy announced last year, which said it would looking at reducing and preventing serious harm, setting and testing higher standards and promoting competition and positive change.
As part of the above priorities the FCA will work with the Treasury to implement a new regulatory framework so it can “address emerging harms more efficiently”.
It also aims to improve consumer protections and standards and ensure support for struggling customers is a priority.
Nikhil Rathi (pictured), chief executive of the FCA, said: “We set out a bold vision last year of what we wanted the FCA to be, and we are well underway to achieving our objectives thanks to our talented colleagues and the better use of technology and data across our organisation.
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“With many consumers across the UK struggling with the cost of living and market events causing concern, we have put in place vital changes over the past few years which mean we’re better set up to face these challenges.”
FCA will target riskiest, harm-causing firms
Within its putting customers needs first focus, the regulator said that it wanted to prioritise action against the riskiest firms or those causing harm, improve its “proactive and data-led detection of problem firms” and use additional resources to increase the number of firms it takes action against.
It added that it would improve its redress framework, so it would consult with firms on guidance, review its rules on access to the Financial Ombudsman Service for SMEs and develop proposals to improve the complaints process.
The FCA added it wanted to bring in a “new regulatory return” which would mandate that around 20,000 solo regulated financial services firms to give a “baseline level of information” about financial resilience.
On the Appointed Representative (AR) side, it said that in the coming year it would test that firms had embedded new regime rules and it wanted to increase and improve engagement with firms and stakeholders.
Other priorities include slowing the growth in investment fraud victims and losses, hindering the growth of authorised push payments, fraud cases and losses and lowering the incidence of money laundering by improving supervision.
FCA will create additional interventions team
Under the setting and testing higher standards umbrella, the regulator said that it would use Consumer Duty funding to “undertake sector-specific supervisory work”.
This will allow the FCA to “identify, assertively supervise and effectively enforce against activities which undermine effective competition and good consumer outcomes”.
The regulator said it would review its debt advice rules and consult on changes to mortgage, consumer credit, and overdraft rules to improve consumer outcomes.
The FCA said additional funding would be used to create an additional interventions team within its enforcement division.
“This function will be ready from day one of the duty coming into force to enable rapid action where immediate consumer harm is detected. Further investigative resource will also ensure swifter investigation of any potentially serious misconduct discovered,” it added.
The FCA said that it would bring in an “application gateway” for companies that want to approve financial promotions for unauthorized firms and the regulator’s register would include information about firms’ abilities to approve promotions.
It continued that it would grow its “technological capability” to search across social media platforms to single out illegal financial promotions “faster and in larger volumes”. It said that it would work with agencies and ‘fin-fluencers’ to “educate them about their obligations when promoting financial services”.
There is also work on ESG strategy and minimising the impact of operational disruptions.
Further recruitment on the cards
The FCA said that its headcount had grown from 3,800 at the start of last year to around 4,500 at the end of last month.
The regulator said that there had been “significant increases” in resources for its authorisations division and enforcement and market oversight division.
It said that it expected to continue to grow its headcount “steadily” this year to “meet a growing remit” and allow it to meet key aspects of its strategy.
The regulator said that it had opened a Leeds office in September to enhance its digital and data capabilities and was on track to double its colleagues in Scotland to over 200. It also has presence in Cardiff and Belfast.
FCA aims to complete major upgrade to ‘core regulatory system’ this year
The FCA said that it was aiming to be a “data-led regulator” and it was “exploiting our investment in cloud technology, implementing new digital capabilities and designing new data solutions required by the front line of the business”.
It added that it aimed to complete a major upgrade of its “core regulatory system” this year and improve its intelligence capability through automation of analytics tooling, which it said would help detect and respond to consumer harms faster.
The regulator said it was making more investment in cyber security and operational resilience and it wanted to reduce firm burden by bringing in additional data collection improvements.
Challenges for the year ahead
The regulator said that the past year had “seen record levels of volatility” and the economic and geopolitical environment would “remain highly uncertain” in the year ahead.
One key uncertainty was interest rates and inflation, with the FCA noting that financial market expectations “remain volatile”.
It added that there was a risk that unemployment could rise more than projected as the Office for Budget Responsibility (OBR) expects the economy to contract by 0.2 per cent. Bank of England figures suggest that unemployment rates could range between three and eight per cent, indicating “significant uncertainty”.
The FCA added that there was potential for further decline in real household disposable incomes, pointing to higher mortgage rates and rising prices squeezing real income.
It noted that inflation easing would ease pressure but the impact would be “lagged” so some households could still have “negative cash flow”.
The regulator continued that there was still possibly of further market volatility, with the war in Ukraine posing further risks. It added that markets were on “high alert for any widespread contagion from increasing volatility”.
It said that wholesale markets had recovered from gilt markets volatility and the impact on pension funds from the mini Budget last year but it would “remain alert to potential problems and be ready to act if necessary”.
The regulator said that wholesale market participants “may need to take action to manage heightened operational and market risk”.