FCA announces strategy for 2022-2025 – how will it impact your financial organisation?
8th April 2022 by Brielle Hewitt
The FCA’s Strategic plan prioritises better data and oversight, robust controls, technology adoption, AR/ Prinicipal reformation, and improved operations to improve the protection of consumers and financial markets.
The Financial Conduct Authority (FCA) published its three-year plan on the 7th of April 2022, outlining its core commitments and focus as the regulator of the British Financial industry. Promising to be tougher on, and have more stringent oversight, controls and action over financial firms operating in the UK.
Our key takeaways from the plan;
- The regulator is upping its game with improved technology, operations and oversight
- It will deliver better intelligence and analysis through data, and more skilled people
- The regulator is taking a more assertive approach to action against risky firms, sending a clear signal to others putting consumers at risk, with them clearly stating “improve now or you’re next”.
With the regulator turning to technology to support its strategic regulatory plans, so too must financial organisations. Technology supports robust and compliant operations, protects consumers, and business outcomes, and most importantly for the ‘regulatory doers’ of a financial organisation – technology provides compliance professionals with time-saving and effective tools to help them do their jobs well.
Our summary of the plan
The FCA’s regulation affects consumers, businesses and the UK economy. The regulator has outlined strategic objectives to ensure financial services markets function well. With operational objectives to protect consumers, maintain market integrity and promote competition in the interests of consumers.
In developing its strategy, the FCA has also considered:
- The rising costs of living – Greater vulnerability among consumers due to the pandemic, driving a greater demand for a greater range of credit products.
- Digital transformation, redefining markets – There are financial products that are not currently regulated, as they sit outside the perimeter of the FCA’s regulation. Therefore, the FCA has to adapt how they prepare and respond to this continued transformation.
- The importance of financial services in the global economy – Firms must manage the risk of financial crime and operational disruptions. There is a need to be extra vigilant in times of geopolitical uncertainty.
Recent years have seen a lot of change within the FCA, with over 200 new employees onboarded to support with meeting the regulator’s goals, and the appointment of a new CEO, Nikhil Rathi.
Rathi’s headline message:
“Retaining the ability to move at speed will be crucial, as will remembering that high standards are a prerequisite, not an alternative, to global success.
We are being tougher on firms who want authorisation to operate in the UK, using data more systematically to ask the firms we supervise more rigorous questions and using our enforcement and intervention powers more actively, pushing the boundaries where we need to”.
The plan lays out the regulator’s areas of focus over the next three years will be:
Reducing and preventing serious harm
“We’re focused on protecting consumers from the harm that authorised firms can cause. We’ll use our full range of tools from competition to policy and from supervision to enforcement so we address these causes of harm efficiently and consistently. We’re building on the changes we’ve made to how we operate so we act faster, protect more consumers and, where we can, prevent harm before it happens”.
The regulator will deliver on this focus area, by;
- Harnessing data to assess problems more quickly, and act sooner, preventing harm from happening in the first place
- Stopping firms with inadequate harm-prevention controls from entering the market
- More robust and efficient processes for authorising new firms (with a dedicated team of 95 newly hired FCA colleagues)
- Removing problem firms from the market (with dozens of new FCA colleague hires)
The FCA has made six commitments within this focus area;
- Commitment 1 | Dealing with problem firms
- Commitment 2 | Improving the redress framework
- Commitment 3 | Reducing harm from firm failure
- Commitment 4 | Improving Oversight of Appointed
- Commitment 5 | Reducing and preventing financial crime
- Commitment 6 | Delivering assertive action on market abuse
Setting and testing higher standards
“Focusing on outcomes will help to identify problems earlier, so we – the FCA and regulated firms – can prevent problems escalating or becoming widespread. By focusing on outcomes, we’ll give firms greater flexibility. We will promote effective competition to help drive these higher standards and push firms to be responsive to consumer
and market needs. Firms need to understand their consumers’ needs and to have the flexibility to support consumers so they get good outcomes. This is particularly important as consumers face increasing financial pressures”.
The regulator will deliver on this focus area, by;
- Focusing on the new Consumer Duty
- Ensuring every firm considers the actual impact of their products and services on consumers
- Giving greater certainty to firms on how they should treat consumers
- This provides greater flexibility on how firms deliver good outcomes
- Supporting future innovation by outlining clear and required standards, whatever the product
- Encouraging firms to show leadership to do the right thing,
The FCA has made four commitments under this focus area;
- Commitment 1 | Putting consumer’s needs first
- Commitment 2 | Enabling consumers to help themselves
- Commitment 3 | Implementing a strategy for positive change, ESG priorities
- Commitment 4 | Minimising the impact of operational disruptions
Promoting competition and positive change
“Financial services are a global industry and the UK is a world leader, with widely recognised and respected high standards. The UK’s wholesale markets are clean and competitive. Maintaining those standards and our reputation means constantly striving to improve. Our aim is to have open markets, supported by accessible rules. Our high standards support firms to grow and innovate, and our competition enforcement powers enable us to step in where firms restrict competition”.
The regulator will deliver on this focus area, by;
- Offering greater regulatory open-mindedness and collaboration with the industry
- Continued pioneering with their ‘sandbox’ programme, and introduction of ‘scalebox’
- Supporting partners wo are beginning to mandate climate-related disclosures
- Adapting the regulatory system to further strengthen the attractivens of UK capital markets
- Greater transparency and accountability from the regulator itself
- Retaining the ability to move at speed, while maintainig hight standards
What does this strategy mean, operationally, for financial firms?
The FCA has outlined it’s expectations for regulated firms and individuals many times over many years, this strategy is an evolution of the regulators expectations as the world, and financial services has changed drastically over the last 2 – 3 years. In the plan, the regualtor stresses that firms are responsible for conducting their business in a ‘proper and responsible way’.
“It is first and foremost a firm’s responsibility to treat customers and handle complaints fairly and, when necessary, provide redress. This includes the need to communicate clearly and transparently and help customers
understand risks. Firms are responsible for following our requirements. We supervise to test that firms and individuals comply with our rules. But we expect firms and individuals to follow the spirit, not just the letter, of our rules and guidance. To support this, we are shifting our approach so we focus more on outcomes. We will give firms greater flexibility on how they deliver good outcomes and focus more on testing, and requiring firms to test, what their decisions mean for customers. If firms can consistently focus on delivering good outcomes, then we won’t need to make as many rules or rule changes, reducing the long-term cost of regulation.
We want to help firms demonstrate that they are achieving good outcomes in a cost-effective way. We are committed to improving our reporting requirements, for example, through automated data collection. Through aiming for operational excellence, we will continue to find new ways to reduce the regulatory burden on firms at all stages of regulation, balancing the need for efficiency with effective oversight”
The regulator then goes on to outline how they are improving their operations, which will ultimately have a knock-on effect across the wider financial industry:
- Improving how it uses data and technology to act decisively in consumers’ interests
- Testing the limits of its own powers and working with partners to maximise its regulatory impact
- Learning and adjusting its approach as consumer choices, markets, services and products evolve
All of this combined sends a strong message to businesses in the financial industry. Ensure your houses are in order, as the regulator is upping its game, and they are coming in far stronger than before for those firms that are not operating to the regulator’s standards.
We will be exploring this strategic plan in more detail in the coming weeks and months through articles, online panel discussions and workshops, be sure to follow us on LinkedIn and sign-up for our newsletter for the latest updates.
How can Fingerprint help?
Effective oversight is a core theme of this plan, and Fingerprint’s Supervision platform enables regulated firms to have effective oversight over ALL in scope communications. It simplifies compliance monitoring workflows and enables powerful and effective reporting that is will satisfy both your firms regualtory requirements, as well as general management oversight. It automates many of the currently manual, ineffective processes of communiations monitoring activity, but still allows for human judgement and decisions for management of risk.
Speak to our expert team today to find out how Fingerprint can support your firm to achieve efficient compliance operations, in a cost-effective way.