In recent comments, leaders of the UK Financial Conduct Authority (FCA) have emphasized that, in order to promote growth, regulators must be allowed to take more risks.
In a letter sent to UK Prime Minister Keir Starmer last week, Nikhil Rathi, CEO of the FCA, warns that plans to ease regulations would necessarily increase consumer harm and financial failures. "We will not stop all harm when making risk-based choices about the cases and intelligence we pursue," Rathi writes.
The FCA is committed to making "deep reforms" to promote economic growth, but these reforms are only possible if there is "enduring acceptance" in government that regulators need to "prioritise resources and that there will be failures," Rathi explains.
In an opinion piece published in City AM this week, Ashley Alder, Chair of the FCA, echoes these sentiments. "At the FCA we have long recognised effective regulation can be a powerful enabler of growth," Alder writes. “Delivering on our primary objectives of protecting consumers, keeping markets clean and promoting competition all contribute to building trust and confidence in financial services which can in turn spur growth.”
The FCA has already taken action to fulfill its secondary objective to facilitate competitiveness and support growth, Alder explains, and it is ready to go further. "This will require a bolder approach," he writes. "We will have to make decisive trade-offs. And we will have to take greater risk." If they are to take such risks, regulators will need the backing of the Government and Parliament, Alder argues. And there will need to be a shared understanding and acceptance of the regulators' risk appetite, he adds.
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