FCA boss sounds alarm financial system resilience
The boss of the Financial Conduct Authority (FCA) has sounded the alarm on Britain’s resilience against escalating geopolitical tensions, warning the country’s financial system is not sufficiently prepared the confluence of escalating security threats it faces.
In a speech calling for finance to be put at the heart of the UK’s defence strategy, Nikhil Rathi said private ownership of vital infrastructure like data centres and payment networks has left markets especially exposed to the dangers posed by organised criminals and nation states.
“Conflict today hits balance sheets, funding, markets and consumers as much as any battlefield,” he told attendees of the City Dinner in Mansion House. “And we are not prepared, tactically or strategically.
“Whether it’s a cyber-attack or a production shock – they move yields and test confidence.”
Rathi, who earlier this year was reappointed as the FCA’s chief executive for a second term, warned that threats to security have evolved dramatically in the past three years, and warned against “separating financial services from national security”.
UK ‘massively under-insuring’ – FCA’s Rathi
Russia’s invasion of Ukraine – and the outbreak of conflict between Israel and Hamas – has sparked a dramatic rise in unorthodox methods of battle, including crippling attacks on ATMs and payment systems, and obstruction of vital shipping lanes in the Red Sea.
A recent spate of cyber attacks has also exposed the vulnerability of several UK firms to bad actors, with Jaguar Land Rover, Marks and Spencer and Heathrow all struck by high-profile attacks that ground their operations to a halt in recent months.
“The financial system – which determines how assets are insured, invested in and built – is as vital as any arsenal or base,” Rathi continued, warning that British firms were “potentially massively under-insuring”.
He added: “Globally, a fraction of catastrophe and cyber risks are insured. The rest migrate to company P&Ls, credit ratings, risk premia, prices, and ultimately to households.
“And when cover is thin, it hits the Exchequer. That, along with the impact on livelihoods, drives popular anger.”
The FCA boss was speaking alongside the Lord Mayor of London, who issued a rallying cry to the UK’s financial system to redouble efforts behind ideas that boost risk-taking and slash red tape.
In one of his last speeches in post, Alastair King urged policymakers to relinquish firms from “excessive layers of regulation” and called on bosses to embrace a more positive, less risk-averse outlook.
“At a time when rival financial centres like New York are investing and innovating at speed there is no place for the stereotypical British reserve,” he said.