Evolving Relationship between FCA and UK Government

The evolving relationship between the Financial Conduct Authority (FCA) and the UK government raises questions about regulatory priorities and independence. The FCA will more than likely continue in its current structure. However, it is clear that there will be more government intervention on the priorities of the regulator. 

With limited resources available to the FCA, this change will inevitably lead to a reprioritisation of the FCA's agenda, potentially elevating issues with direct impact on voters and economic growth.  

Shifting Priorities  

The FCA may find itself focusing more intently on matters that resonate with the broader public and contribute visibly to the UK's GDP. This could include:  

• Enhancing consumer protection in retail banking, such as financial inclusion and ensuring that consumers can benefit from innovations like Open Banking without facing barriers or exclusion.  

• Promoting innovation in fintech to boost economic competitiveness, such as encouraging the development of digital-only banks and specialized banking services for specific professions.  

• Addressing the cost-of-living crisis through financial regulation, such as ensuring fair pricing and preventing excessive fees or interest rates on essential financial services.  

Potential Trade-offs  

As the FCA aligns more closely with government guidance, certain areas of financial services regulation might receive less attention. These could include:  

• Oversight of niche financial products, such as certain aspects of securitisation regulations. The FCA has decided not to change the way firms populate or submit templates related to securitisation, acknowledging the cost implications for firms and opting to maintain the status quo.  

• Regulation of specialized market infrastructure, such as the detailed oversight of wholesale data markets. While the FCA conducted a study on wholesale data markets, they ruled out significant intervention due to potential unintended consequences, indicating a more cautious approach in this area.  

• Supervision of certain wholesale market activities, such as the change in control regime for Electronic Money Institutions (EMIs). The FCA has not exercised its power to disapply this regime for EMIs carrying on business activities other than the issuance of e-money and payment services, suggesting a lower priority for altering existing controls in this sector.  

  
  

These examples reflect areas where the FCA has either decided not to pursue new actions or where their approach suggests a more measured stance, potentially indicating a shift in regulatory priorities in response to government guidance or other factors.  

Balancing Act  

The challenge for the FCA lies in maintaining its effectiveness as a regulator while responding to evolving governmental priorities. This delicate balance will require careful navigation to ensure that critical aspects of financial stability and market integrity are not overlooked in the pursuit of more politically salient objectives.  

At Leaman Crellin our team’s expertise is unparalleled. We offer tailored solutions on all financial regulatory and compliance matters from consultancy and training to insights and regulatory alerts, get in touch to see how we can support you and your business.