A View From The Exchange – What the FCA's New Five-Year Strategy Means for Regulated Firms

Last Wednesday, Emily Shepperd, the FCA's Chief Operating Officer, outlined the FCA's new five-year strategy in a speech, highlighting four main themes: 

1. Responding to industry feedback, the FCA pledges to become more efficient, effective and proportionate in its regulatory actions. It aims to streamline its operations, reduce regulatory costs and increase value for money. This includes rethinking supervisory practices and leveraging technology to automate routine tasks.
2. Tackling financial crime remains a top priority. The FCA plans to enhance its focus on outcomes. It also wants to increase data sharing with other regulators (both domestically and internationally) and deploy more data analytics. Solutions like digital passports for identity verification are also being considered to reduce the burden of compliance while maintaining high standards.
3. Building consumer resilience will remain crucial. The FCA wants consumers to have access to appropriate financial products and services. To this end, it expects firms to comply with the Consumer Duty, empowering their customers to make informed decisions. It will also focus on financial inclusion and the provision of basic bank accounts.
4. The FCA recognises the importance of fostering a thriving financial services sector. This can only be achieved by supporting innovation and growth. The FCA plans to reduce regulatory costs, support new business models and facilitate investment in the real economy. Initiatives like the Regulatory Sandbox and the AI Lab will help firms innovate safely and responsibly.

For regulated firms, these strategic themes present both opportunities and challenges:

• If the FCA's plans to increase operational efficiency come to fruition, firms can expect a more streamlined regulatory process which reduces the overall administrative burden and associated costs. At the same time, they must be prepared to adapt to new supervisory practices and increased automation.
• In relation to financial crime compliance, while the focus on innovative solutions like digital passports may ease some compliance, firms must remain vigilant and proactive in their anti-financial crime measures. The FCA's emphasis on outcomes means firms will need to demonstrate the effectiveness of their systems and controls in practice.
• Firms may need to align their product offerings and customer interactions with the FCA's consumer resilience goals. This includes ensuring transparency and clarity in financial products and services, which may require revisiting existing practices and policies.
• The FCA's support for innovation and growth provides a fertile ground for new business models and technologies. Firms should explore opportunities to engage with initiatives like the Regulatory Sandbox and the AI Lab, while keeping the right balance between innovation and risk management.

Author: Jonas Weissenmayer