Reform on strong foundations
The FCA emphasises that it has successfully set higher standards, delivered regulatory reform and improved operational capabilities through its previous strategy. With these resilient foundations in place, the focus has shifted towards supporting firms "to seize future potential," aligning with commitments conveyed in the FCA's letter to the Prime Minister, Chancellor, and Secretary of State on a new approach to ensure regulators and regulations support growth. With the FCA facing pressure to reform both its operational approach and the regulatory environment within which firms operate, the shift in tone of the FCA’s most recent strategy is not surprising.
The FCA has committed to “enabling investment, innovation and ensuring the continued competitiveness” of financial services, and has identified a number of ways in which it will seek to achieve this.
An increasingly tech-positive approach
Firstly, the FCA has promised to support improvements in productivity through “an increasingly tech-positive approach”. Much of the detail here will be familiar to those who have been keeping across the innovation agenda that the FCA has had in place since the early days of its creation. The strategy refers to the innovation services which have in the recent past seen the FCA partner with industry in relation to AI and machine learning technology, and where future plans include efforts in relation to tokenisation in asset management. The National Payments Vision is included under this broad heading, and new energy will be put into previously mentioned plans to build on the success of Open Banking with Open Finance.
Redress reform and removing unnecessary regulatory burdens
Secondly, there is a commitment to reforming the rule book and stripping out redundant requirements which seems to go further in its ambitions than FCA statements on this topic in the past.
The FCA appears to be genuinely committed to reforming the redress regime, recognising that the current regime can cause uncertainty for firms and their investors, as well as the consumers it is intended to serve, risking investment and innovation. The effects of this confusion have been felt more acutely over the last year or so. However, a new regime is some way off. The FCA and Financial Ombudsman Service are due to feedback on their joint consultation on ‘Modernising the Redress System”, which closed at the end of January 2025. In the meantime, firms might find that proactive and innovative solutions for dealing with mass-claims events and delivering consumer redress gain more traction with the regulator. The FCA’s ambition to make meaningful change in relation to retail financial services, where the pendulum had until very recently been swinging clearly the other way, can also be seen in the FCA’s plans in relation to the Consumer Duty.
On the same day as the announcement of the 2025-2030 strategy, the FCA released proposals following the Consumer Duty rule review, which focussed on removing requirements where similar outcomes may be achieved with greater flexibility. This follows the removal of the requirement for a Consumer Duty Board Champion in January. The proposals include plans to withdraw outdated supervisory publications and guidance to clarify that these no longer reflect the FCA’s expectations, review prescriptive disclosure rules and revisit rules for businesses with customers outside the UK. An “accelerated consultation process” will be used to act immediately where there is appetite and a clear case for change. This is coupled with a commitment to work with the industry where there has been mixed feedback, to ensure that changes are proportionate and predictable.
Re-balancing trade-offs to unlock capital investment
Finally, and perhaps most ambitiously of all, is reform of the financial services regulatory regime to allow a more effective whole-system response which draws better connections between flows of capital and the long-term investment needs of consumers and the economy. The big set-piece reforms in this context include the significant reform agenda that the FCA has underway in relation to primary capital markets, and the supporting efforts to widen retail access to a broader range of investment activities.
From other public statements it has made, it is clear that the FCA recognises that achieving this will require a broad acceptance of a more fundamental rebalancing of risk. In the strategy, Ashley Alder has called for a collective attitude shift towards risk across financial services, with a clear message that “rebalancing risk can spur growth”. This in turn echoed the FCA’s previous requests for the UK government’s acceptance of greater risk-taking to achieve necessary reforms.
Nikhil Rathi’s recent speech “On the right track: Connecting consumers, products and growth” provides some insight into how the FCA is looking to reconcile the interests of consumers and economic growth through “bold ideas”. For example, supporting the ability of pension funds to invest more into private markets to enhance long-term returns is described as “transformative for individuals, but also our economy”. In both the latest FCA strategy and Nikhil Rathi’s speech, there is an emphasis both on the cultural shift required to achieve these outcomes for consumers and the economy, and on the need for an acceptance of certain “trade-offs” where outcomes will not be even across the board.
This speech also drew a neat connection between this broad policy aim and a recent FCA multi-firm review in valuation processes for private market assets, with Nikhil Rathi noting that the work was intended to help give investors the confidence to grasp the significant opportunities in private markets. This example might give a broader insight into how the FCA could seek to use the more focussed supervisory approach, as discussed in our previous post in this series, to mitigate some of the risks associated with a more growth-focussed strategy.
Measuring success
The FCA has also provided detail on the outcomes and metrics used to track its success at “supporting growth”, which have a clear focus on increasing the competitiveness and attractiveness of the UK financial sector internationally. These measures include maintaining the UK’s position as one of the top global and financial FinTech centres, an increase in financial services exports, and an increase in capital raised by business. Given the difficulty of demonstrating the FCA’s influence on these measures, we can expect the FCA to particularly prioritise the metric measuring the use by firms of the FCA’s innovation and tailored authorisation services, where the impact of the FCA’s efforts are likely to be more directly felt.
