In April, the FCA published its three-year Strategy, setting out how it will achieve better outcomes for consumers and markets throughout the UK. Alongside that, the FCA published its latest annual Business Plan for 2022/23, setting out its priorities and actions over the next twelve months in support of the Strategy. We summarise the key themes in the three-year Strategy and annual business plan in this month’s insight.
The FCA took a new approach to both publications, which pursues an outcome-focused and data-driven strategy linked to a clear set of metrics by which the FCA’s performance can be assessed and challenged. This is a significant shift from the regulator’s traditional approach based on cross-sectoral and sector-specific themes and policy initiatives.
In the new Strategy, the FCA will focus on achieving 13 commitments related to three key areas outlined below.
Focus Area 1 – Reducing and preventing serious harm:
- Deal with problem firms – act faster in identifying and reacting to firms causing harm to consumers or wholesale markets.
- Improve the redress framework – to ensure consumers receive prompt compensation.
- Reduce harm from firm failure – ensuring firms can meet their financial resource requirements and recover quickly from disruptions to their business models.
- Improve oversight of Appointed Representatives – revamp the requirements on Principal firms.
- Reduce and prevent financial crime – promoting a collective effort to prevent money laundering and financial crime both in the UK and internationally.
- Deliver assertive action on market abuse – by increasing the resilience of financial services markets and detecting and taking decisive action
Focus Area 2 – Setting and testing higher standards:
- Consumer protection – a focus on the proposed new Consumer Duty.
- Enabling consumers to help themselves – including new restrictions on the financial promotion of crypto assets.
- Prioritise ESG – ongoing development of the FCA’s Strategy for positive change, including climate-related disclosures for asset managers and sustainability disclosure requirements
- Minimising the impact of operational disruptions – by testing firms’ resilience to inevitable operational disruptions.
Focus Area 3 – Promoting competition and positive change:
- Prepare financial services for the future by tailoring FCA rules to better suit UK markets and globally.
- Strengthen the UK’s position in global wholesale markets – so that the UK is one of the leading markets of choice for issuers, intermediaries, and investors alike.
- Market digitisation – understanding and shaping the emergence of digital markets and the risks and opportunities that come with this, ensuring harms are mitigated.
The FCA has also published its very first “Outcomes and Metrics” publication, which forms a significant part of its more transparent and accountable efforts.
The FCA also defined four consistent top-line outcomes in the Business Plan that cut across consumers and wholesale markets, underpinning both its expectations of firms and its supervision. These are:
- Fair value – providing market participants with the right degree of transparency to assess value and risk.
- Confidence – markets that are resilient to firm failures and clean of market abuse, financial crime and misconduct.
- Access – markets that are accessible and remain orderly under a range of conditions.
- Suitability and treatment (consumer markets only) – consumers receive good treatment and are presented with suitable products and services and good treatment.