The City watchdog I chair is becoming more innovative – and assertive
Richard Lloyd OBE is the interim chair of the Financial Conduct Authority
Our annual report shows the Financial Conduct Authority continues to change. Becoming more innovative, assertive and adaptive.
We are being tougher on firms that want to operate in the UK to make our markets safer. Last year one in five applicants didn’t obtain authorisation, up from one in fourteen the previous year.
We used anti-money laundering criminal prosecution powers for the first time, and are being more proactive in addressing risks to consumers, even beyond our jurisdiction.
Following tenacious engagement with Google, firms we do not authorise can no longer advertise financial products on the platform, helping to protect consumers from scams.
We know robustness must not undermine efficiency. While we reviewed over 73,000 applications for authorisation last year, dealing with over 96% of these within standard deadlines, some types of application took much longer.
To improve this, we have increased our capacity and are improving our processes to reduce the time firms and individuals wait for a decision. So far, we have recruited nearly 500 new colleagues this year, in London, Leeds and Edinburgh, including in authorisations and areas like data and tech.
Because, rather than waiting to address specific firm or asset class issues, we are changing the way we operate.
This is why the FCA board sanctioned over £100m of investment in our data and technology capabilities, to improve our decision making, and help us spot harm and intervene more quickly.
We are now scanning 100,000 websites every day to identify scams, with hundreds of websites taken down as a result, and we have developed an automated tool to test firms’ systems and assess their ability to identify sanctioned entities effectively. This is all the more vital at a time of huge economic pressure on consumers and war in Europe.
This more assertive approach will undoubtedly face legal challenges from well-resourced and determined individuals and companies. I am well aware that there are some who dislike our independence, do not see the value to the economy of proportionate, evidence-based regulation, and who may have forgotten the lessons of the recent past.
We won’t always win but we do not see that as failure. We have empowered more of our people to take more decisions, more quickly – and we will back them when they do so.
The board recently signed off on a new multi-year FCA strategy which puts outcomes at the heart of everything we do. Major areas of focus include preventing serious harm from happening in the first place and constantly setting and testing high standards across the market.
We’ll shortly be breaking new ground by introducing a new Consumer Duty, which will set higher standards and require firms to focus on meeting their customers’ needs in everything they do.
We think this will be a real game changer for the level of protection consumers receive in the UK. It should mean people receive communications they can understand, products and services that meet their needs and offer fair value, and they get the customer support they need, when they need it.
This is hardly controversial but, too often, still doesn’t happen.
For firms, greater clarity about our expectations, including for products not yet on the market, will provide more certainty. Fewer detailed rule changes should bring down costs, while we’ll be able to act more quickly and assertively where we spot practices that don’t meet our expectations.
This focus on high standards supports a world leading approach to positive, sustainable innovation.
Our regulatory sandbox has already supported the development of over 160 UK businesses, and has been copied around the globe. More recently, a significant number of Crypto firms who passed our requirements to register for anti-money laundering purposes, only did so after we worked with them to bring their controls and systems up to standard.
In other areas, the UK was the first major economy to mandate climate-related disclosures. We know there is much more to do but we are now working with international partners as they develop their policies, to support the global transition to a low carbon economy.
And we recently introduced new rules for listed companies, requiring them to declare their diversity metrics against common targets on a comply or explain basis, and have set even higher standards for our own executive leadership.
The Government’s new financial services bill is an opportunity to ensure that, as the world around us changes, we maintain a coherent system of regulation that can keep up with emerging risks of harm to consumers and market integrity, with independent regulators trusted to act in the public interest.
We are doing all this because, in a fast-changing and highly uncertain world, it has never been more important to have independent, impartial regulatory institutions willing to run towards problems. Our annual report, as part of the FCA’s strong system of accountability to Parliament, confirms our commitment to maintaining high standards that support the economy in the interest of consumers.