FCA publishes its 5 year strategy

The FCA has launched its much-trailed 5 year strategy for 2025 to 2030. It will focus on 4 priorities which aim to reinforce one another:

1. being a smarter regulator that is more efficient and effective;

   
   

2. supporting sustained economic growth by supporting innovation and positioning the UK as a desirable location for the financial services industry;

   
   

3. helping consumers to navigate their financial lives by building trust in financial services and enabling the support, product innovation, and information that supports this; and

   
   

4. fighting financial crime whether undertaken through, against or by financial services businesses.

Insights from the launch event

One of our cofounders, Gillian Roche-Saunders, attended the launch event for the strategy, held at Westminster on 25 March, where CEO Nikhil Rathiand Chair, Ashley Alder spoke.

It was clear that in supporting the UK's international competiveness the FCA seeks to be a regulator ready for geopolitical, climate, technological and demographic changes.

The FCA is also looking to become more "predictable, purposeful and proportionate" which many firms will welcome.

We're essentially looking a pro growth, pro innovation regulator who will be standing firm on financial crime and consumer duty but will be happy to streamline regulation elsewhere, and will focus much of its supervisory energies on 'outliers'. 

Gillian Roche-Saunders, Partner at Adempi

What will change?

For each of the 4 priorities the FCA has summarised how it plans to achieve them. We've pulled out some examples to give you a feel for what lies ahead.

All firms

• all firms will be provided with better direct contact points;

• firms will be given an earlier chance to make change before the FCA takes action;

• the application process will be digitised to make it easier and with less need for follow-up requests - great news for firms seeking authorisation or varying their permissions;

• the FCA plans to strip out redundant requirements in regulation, and highlights this may particularly benefit the asset management and insurance sectors;

• a revision of the rules to enabe product innovation and wider access – not least reviewing mortgage affordability requirements, targeted support to allow consumers to make the most of their pensions where they don’t take financial advice, and reforming disclosure rules. It will rely on the Consumer Duty to underpin these developments;

• the largest firms will no longer necessarily be set a specific 2 year supervisory programme, with the FCA instead moving to less intensive supervision of those it can see are trying to do the right thing;

The regulator's approach

The way the regulatory views its role will be adjusting which will also have a knock on effect for firms and highligths what to expect. Examples include:

• streamlining how it communicates its supervisory priorities, meaning fewer Dear CEO letters and a move towards an annual report sent out to each sector outlining risks, opportunities and priorities;

• ensuring it asks for data only when it needs and will use it;

• focussing on rebalancing risk for itself, firms and consumers – referring in passing to the fact that putting money in ‘risk-free’ easy access accounts may not be best for consumers;

• faster enforcement outcomes;

• continuing to raise awareness of frauds and other financial crimes, while working with agencies and firms who want to tackle crime.

Sector specific priorities

• Payments: prioritising the development of seamless account-to-account payments and progressing work on Variable Recurring Payments;

• Banking: putting Open Banking on a commercial footing and planning the roll out of Open Finance, which will prioritise small business lending and which the FCA plans to start putting in place by the end of 2027;

• Pensions: driving better value for money in workplace pensions;

• Insurance: focussing on fair value and competition in insurance markets – specifically the pure protection markets;

  
  

What to expect next?

The changes proposed by the regulator seem sensible and well-targeted. Whether this will have a meaningful impact on day to day business for firms remains to be seen.

As this is an FCA-led initiative, we would expect to see changes come through in the FCA’s approach when next engaging with firms shortly and certainly should be evidenced in the regulatory streamlining proposed over the coming year.

All change to regulation requires work of compliance teams to adapt policies and practices. However, any steps to lessen the regulatory burden should be welcomed and the benefit to FCA regulated firms should make the regulatory change project ahead worthwhile.

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Adempi is an FCA compliance consultancy. If you’d like to speak to one of our experts about a regulatory change project, or any other form of FCA compliance support and training, you can reach us at contact@adempi.co.uk or on 0203 925 4761.