UK Financial Conduct Authority responds to Government call for regulators to support growth

The Financial Conduct Authority has published a letter (dated January 16, 2025) from Nikhil Rathi, FCA Chief Executive, sent to the Government, setting out its work to ensure that it is supporting the Government's U.K. growth mission. The letter responds to Government's December call for regulators to support growth. In the letter, the FCA explains that to achieve the vast reforms, the FCA will need to take greater risks and prioritize resources. The Government's support and acceptance of this approach is required, including an acceptance that there will be failures because it will not be possible to prevent all harm under an approach based on risk-based choices. The FCA emphasizes that this acceptance needs to be shared across all accountability mechanisms, including in Parliament, and states that metrics for "tolerable failures" within the overall system would assist.

The areas addressed in the letter include:

• unlocking capital investment and liquidity: in addition to the planned reforms for the wholesale markets, the FCA will fast-track a review of capital requirements for specialized trading firms to improve liquidity;
• accelerating digital innovation to enhance productivity: the FCA makes a number of suggestions on how to do this including introducing a new open banking payment method and developing open finance, the removal of the £100 contactless payment limit to enhance consumer flexibility and level the playing field with digital wallets. The FCA also suggests that government action could help by introducing digital identity authentication, enhancing the quality of the Companies House database to reduce costs for business, and digitalizing court systems to reduce delays;
• reducing the regulatory burden: the FCA will continue work to remove unnecessary regulation in 2025, such as streamlining the handbook. However, the FCA notes that government support is needed for other workstreams, such as reducing the costs of AML compliance by reducing know-your-customer requirements on small transactions;
• making it easier for firms to start up and grow: the FCA plans to take steps to speed up the authorization process for firms and work with HM Treasury to create a legislative framework to enable start-ups to carry on limited regulated activities with streamlined conditions;
• improving exports and inward investment, in addition to establishing a presence in the U.S., the FCA is also planning on doing the same in Asia; and
• certainty and predictability: through proactive management of issues, and improved coordination with the Financial Ombudsmen Service, the FCA aims to prevent further significant FCA-led consumer redress exercises. As part of that, the FCA is considering reforms to the redress framework which may need legislation.

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