| Link(s): | The Gordian knot of growth | FCA |
Context
Nikhil Rathi, FCA Chief Executive, has delivered a speech at an Association of British Insurers (ABI) roundtable event at which he has spoken about how the FCA is working to support growth. The tone of the speech acknowledges the pressure the regulator is facing to reduce the burden of regulation, but is resolute in its position that action has been, and continues to be, taken.
Rathi likens the FCA’s challenge the ‘Gordian knot’ of Greek mythology, the legend of which refers to a complex knot tied by King Gordius of Phrygia, which was said to be extremely intricate. The phrase “cutting the Gordian Knot” has come to mean solving a difficult problem through bold and decisive action. Rathi is setting out what he sees as the bold and decisive action that the FCA is taking.
Key points to note and next actions
- The FCA is working at pace to support growth initiatives.
- Rathi set out the FCA’s intention to continue to move at pace on the 50 or so growth proposals he made to the Prime Minister, including on mortgage affordability, digital payments, removing redundant data returns, supporting international promotion of UK financial services, opening up to more innovative firms and cutting barriers between regulators.
- Perhaps in a reminder to Government, Rathi set out a reminder that one area where the FCA has asked for bold thinking is around the articulation of the Government’s risk appetite, particularly in relation to consumer harm (clearly referring to the balance of risk to consumer harm and seeking to reduce regulatory burden).
- In relation to easing regulatory burdens, firms will be able from 27th February 2025 to choose whether to have a Consumer Duty Board champion or not (rather than it being an FCA expectation going forward – see the above article).
- In relation to impacts on competitiveness and growth, the FCA cannot rule out other major redress events in the event that systemic breaches of the law emerge (clearly referring to the Supreme Court case in relation to motor finance commissions), but it is not currently anticipating any further such mass redress events.
- Referring to the FCA’s recent report on ongoing suitability reviews in the financial advice sectors (IFAs etc.), Rathi says that “And for ongoing advice, where I know there had been concerns that this could become another major redress issue…” – he is reassuring his audience that ongoing financial advice is not seen as a potential major redress issue, which is perhaps his way of saying that not everything is ‘broken’.
- If the FCA is not expecting any other mass redress issues, hopefully that includes any premium finance overrider redress issue (unless that could reasonably be included in “…other major redress events in the event that systemic breaches of the law emerge…”).
- The FCA is alive to concerns around the pace of regulatory change, so is aiming for fewer large-scale changes in its next 5-year strategy.
- Rathi referenced the FCA Discussion Paper that set out options to align conduct rules with FOS eligibility to ease the burden on firms insuring large SMEs, as well as considering flexibilities in product governance and bespoke contract exclusions.
- Rathi made it clear that being serious about growth does not mean a diminishing focus on the FCA’s primary objectives. The ability of consumers to access the right products for them – good quality, fair-value products – when they need to, remains central to the FCA’s purpose and will be an important part of its next 5-year strategy.
- This is supported by another statement made by Matt Brewis (FCA Director of Insurance) at a CII Insurance Institute of London event on 25th February, where he stated that he UK insurance sector is a strong place to do business because we have strong, stable underpinning financial regulation.