The UK’s Financial Conduct Authority (FCA), known for its combative relationship with the financial industry, is embarking on a significant shift in strategy, Bloomberg reports.
A new five-year plan, dubbed “Strategy 25,” aims to foster greater collaboration and support among the 42,000-plus companies it oversees, aligning with the government’s push for pro-growth regulation.
Sources familiar with the project told Bloomberg News that Strategy 25, currently under development following months of stakeholder engagement, will prioritize long-term initiatives focusing on consumer resilience, pension reform, and tackling financial crime, all while emphasizing economic growth. This change in approach follows criticism from Chancellor Rachel Reeves last week, who declared regulators had “gone too far” in their risk-averse policies and called for a more growth-oriented focus.
Miles Celic, head of industry lobby group TheCityUK, echoed this sentiment, stating the FCA is at a “turning point” and that the growth agenda must permeate all levels of the organization. The concern, he added, is that the FCA’s actions could hinder, rather than support, government ambitions.
The shift comes amidst ongoing scrutiny of FCA Chief Executive Nikhil Rathi, whose five-year term concludes next October. Recent controversies, including a contentious plan to publicly name and shame companies under investigation and a clash with the former City minister over consumer rights, have fueled industry discontent. Reports suggest Rathi will not seek a second term. The FCA declined to comment on these reports.
Rathi, appointed during a period of crisis following criticism of the FCA’s handling of the London Capital & Finance mini-bond scandal, has overseen increased enforcement actions, including fines for money laundering failures and crackdowns on online scams. However, industry leaders have criticized his relatively low profile, complaining of infrequent direct engagement. Lord Sharon Bowles, a member of the House of Lords financial regulation committee, described the FCA leadership as operating in an “ivory tower.”
While the FCA highlights improvements in authorization processing times and a significant increase in enforcement cases, these claims are disputed by some industry figures and former FCA staff. Concerns remain about the focus on “low-hanging fruit” in enforcement, neglecting more complex cases with potentially greater impact. Despite this, the FCA points to successes such as the banning of former Barclays CEO Jes Staley.
Strategy 25 will also address the FCA’s expanding responsibilities, including the upcoming supervision of Buy Now Pay Later firms and continued work on private markets and pension reform. The focus on consumer resilience aims to help individuals better manage financial shocks.
Industry representatives emphasize the need for predictable and thoughtful supervision. Concerns remain about the potential for unintended consequences from an overemphasis on risk elimination, particularly in a rapidly evolving technological landscape. Calls for increased transparency and customer-focused initiatives, such as “mystery shopping,” underscore the need for the FCA to navigate its evolving role effectively. The House of Lords financial regulation committee is currently reviewing the effectiveness of UK financial regulators, including the FCA.
