Brendon Vipond, dispute resolution adviser at leading law firm, Shoosmiths, examines the details of the regulator’s plans and shares his view on the likelihood of success – as well as whether it really does represent a genuine policy shift.
The Financial Conduct Authority (FCA) recently revealed the highlights of its highly anticipated 5-year strategy for 2025-2030. Emily Shepperd, Chief Operating Officer of the FCA outlined the focus areas of the strategy in a speech at The City UK National Conference in Birmingham. The strategy to focus on economic growth and innovation, financial crime, consumer resilience, and how the FCA can become a more efficient and effective regulator. However, this bold initiative raises questions about whether it represents a genuine policy shift in approach or is simply an extension of past initiatives.
Positive Change or Past Promises Revisited?The proposed strategy highlights a focus on growth, efficiency, and innovation. While Shepperd referenced progress made in the current strategy, there is a clear shift toward more ambitious and specific goals, such as building consumer resilience, tackling financial crime, and supporting economic growth. The emphasis on “continuous improvement” and “learning from our first 3-year strategy” suggests that this plan isn’t simply a repetition of past promises, but an evolution based on feedback and experience. The inclusion of specific actions such as improving regulatory efficiency, supporting new business models, and facilitating growth through innovation signals a commitment to making meaningful changes, represent a genuine effort to adapt and respond to current and future challenges, not just rehash old goals.
Are these changes enough?Evidently, the FCA has outlined several important actions to meet its goals, including improving regulatory efficiency, increasing focus on financial crime, and enhancing consumer resilience. The move to streamline data requests, improve service delivery, and increase automation indicates a proactive approach to becoming more efficient. However, there may be concerns about whether these actions will be sufficient to address the increasing complexity and scope of financial markets, particularly in areas like financial crime and innovation.
For example, despite the FCA’s focus on tackling financial crime, concerns remain that its approach may merely reiterate past efforts. Financial crime, particularly fraud, continues to be a significant issue, costing the UK over £219 billion in 2023. Despite its ongoing legacy initiatives such as the Economic Crime Plan and Fraud Strategy, significant levels of financial crime persist, with the root cause often outpacing regulatory measures. While the FCA’s new strategy includes using data analytics and technology to detect financial crime, it maintains its previous policy position of working in partnership with the wider national system, seeking to extend this internationally. This raises questions about whether the FCA can truly address the root causes of these crimes, especially given the rise of fraud originating from uncooperative foreign states.
While the proposed steps are solid, such as focusing on data-sharing partnerships and evolving regulatory frameworks, these efforts may need to be continually reassessed and expanded to ensure they address emerging risks, such as cyber threats, new financial technologies, and evolving consumer behaviours.
Funding: leveraging technology to realise efficiencies, reduce costs and increase value for money
While Shepperd did not explicitly discuss the funding challenges faced by the FCA, she did mention the need for the regulator to be more efficient , reducing regulatory cost and delivering increased value for money, reflecting industry feedback that the sector cannot operate with an “open cheque book.”. Shepperd proposed to achieve this by better leveraging technology in the decision making process, a greater focus on data and digital tools in how the FCA regulates, and a refinement of its policy frameworks, simplifying its conduct rules and guidance.
Issue of the accessibility of financial contracts that’s impacting consumer resilience targets.
Shepperd’s remarks touched on the accessibility of financial products and services, focusing on building consumer resilience and trust. While the FCA’s emphasis on the Consumer Duty and the need for clear guidance around financial products is a positive step, it was acknowledged that more work needs to be done to support the financially excluded. However, Shepperd did highlight the FCA’s efforts to ensure that consumers are empowered to understand and choose appropriate financial products. This suggests that, while the FCA is working to improve consumer resilience, further attention may be needed on the accessibility of financial products, particularly for vulnerable or financially excluded groups. Her reference to basic bank accounts not always being offered and the focus on increasing financial education implies that accessibility remains a challenge to be addressed in the strategy.
The FCA’s 5-year strategy sets an ambitious path to tackle financial crime and enhance consumer trust, signalling a more responsive and technology-driven approach. However, its success will ultimately depend on whether the regulator can overcome the persistent challenges of financial crime, improve accessibility, and adapt swiftly to the ever-evolving financial landscape.
