UK regulatorʼs five-year strategy promises fewer rules, more predictability

The UK Financial Conduct Authority (FCA) promised it would be a more “predictable, purposeful and proportionate” regulator and “support growth” yesterday, when it unveiled its strategy for the next five years. Helping consumers and fighting crime were also among its four priorities for 2025-2030, though there was little detail on how these would be achieved.

The FCA also quietly dropped the prefix “secondary” from its growth and competitiveness objectives when listing its operational objectives.

Janine Hirt, CEO of Innovate Finance, hailed the strategy as a “milestone” for financial services and fintech in the UK.

“It recognises the role innovation will play in helping consumers, driving growth, fighting crime and enabling smarter regulation. I am delighted to see innovation woven throughout the strategy,” Hirt said, as she praised the regulator for adopting many of the priorities Innovate Finance advocated for in its 2024 FinTech Plan for Government.

Paul Hamalainen, director of the financial services regulatory centre and sustainability expert at consultants Forvis Mazars, agreed that the FCA’s five-year strategy was targeting the right areas.  

“The four priorities should advance the FCA’s own operational effectiveness and promote the UK as an attractive international financial centre,” he said, but added that the FCA’s wide remit would make remaining focused on its strategic vision difficult.

All new initiatives should clearly set out how they align with the four priorities, Hamalainen said.

The strategy document also outlined key changes in how the FCA will communicate with firms. For example, it is replacing annual portfolio letters for industry segments with a smaller number of market reports that set out “risks and opportunities” for firms.  

Source: FCA

Duty to consumers

The five-year strategy was unveiled alongside a feedback statement on the Consumer Duty. Last year, the FCA asked firms to suggest rules that could be removed from its rule book now that the Consumer Duty’s overarching requirements were in place.

The FCA said it would: review whether and how its rules should be applied to customers based outside the UK; future proof disclosure requirements; reduce administrative burdens; and carry out work to remove complexity or outdated rules.

Lorraine Johnston, financial regulatory partner at law firm Ashurst, said the feedback statement showed the influence of government. “All roads lead to growth. Todayʼs announcement is the natural consequence of a government focused on a growth agenda, which has put the pressure on its regulators to facilitate a more firm-centric, business environment. The challenge for the regulator is how it balances a more proportionate approach with ensuring a balanced risk appetite. 

“This is evident in the feedback statement on the Consumer Duty, which aims to simplify requirements of firms in an area that has been the regulatorʼs north star over the past five years. Not quite a U-turn from the FCA, but definitely a bendy road ahead.”

According to the feedback statement, the FCA will hold a summit to discuss areas for change, and publish a further update on its simplification work in September.

Financial crime

The FCA said it will collaborate with firms and other law enforcement agencies, including sharing intelligence, to tackle financial crime, and work to ensure consumers have the tools to avoid being “duped”.

Two of the three metrics the regulator will use to gauge its success in tackling financial crime by 2030 involve “slowing growth” in fraud, while the third refers to reducing “abnormal and anomalous trading”.

International partners

Acknowledging current geopolitical tensions, the FCA said it might choose to pursue “progress on some issues with a smaller group of like-minded jurisdictions” outwith the established global multilateral organisations. It intends to establish a physical presence in both the US and the Asia-Pacific region to support its fellow regulators and “provide a local touchpoint for financial firms eager to learn more about how to get authorised in the UK”.

Current FCA director of wholesale buyside Camille Blackburn will take up the role of director for growth operations in the Asia-Pacific region in July. A spokesperson said further details, including the locations of the Asia-Pacific and US bases would be provided in due course.