FCA to strip back red tape after conceding consumer duty ‘overlap’
The Financial Conduct Authority (FCA) will look to strip back red tape and “streamline” its regulatory rulebook after conceding that its stringent consumer duty rules were overlapping with swathes of existing regulation.
In a statement today, the City watchdog said it had launched a review of financial services rules after concluding the burden of regulation “could be streamlined” and called on the industry to “identify rules which could be removed”.
The move comes one year after the FCA announced a major package of consumer guardrails, which have drawn criticism from some quarters for the regulatory burden they have placed on companies.
Under the changes introduced last July, City firms have been forced to overhaul their operations and push through sweeping reforms to ensure they are aligning with the duty.
Speaking with CityAM earlier this month, the boss of FTSE 100 asset manager Schroders, Peter Harrison, said the changes had been a “headache” for the firm that required “tens of thousands of pages of work”, though he added it was ultimately a positive shift.
In its statement, the FCA said it was looking to identify rules which could now be scrapped or simplified if “they overlap with the duty”.
“The Consumer Duty marked a major shift for firms and consumers by setting higher and clearer standards of consumer protection and requiring firms to put their customers’ needs first,” said FCA chief Nikhil Rathi.
“We now want to seize the opportunity of the Duty and the move to a clear outcomes-based approach to streamline our rulebook, lowering costs for businesses and supporting the competitiveness and growth of the economy.”
Rathi’s comments point to the regulator’s new secondary objective, introduced by the previous government, which requires it to consider the growth of the UK economy and the competitiveness of the UK’s financial services sector in its regulation.
The watchdog has come under fire from some Westminster and the City due to concerns its consumer duty and plans to ‘name and shame’ firms under investigation were in conflict with its secondary objective.
In a private dinner last year, former Tory City minister Andrew Griffith was reportedly “scathing” of the plans despite them being ultimately directed by the government.
Former Chancellor Jeremy Hunt also launched a broadside on the regulator over its plans to name firms facing investigation, urging it to “relook” at the plans.
In a report published today alongside the review, the FCA defended its record on the secondary objective and said it had “fully embraced” the mandate and embedded it in its “processes, policy-making and culture.”
“We’ve significantly reduced the length of time it takes to become authorised or approved. Today, over 98 per cent of authorisation cases are assessed within statutory deadlines,” the FCA said.
Alongside the broad rule review today, the FCA said it is considering simplifying rules in the UK’s £15.5bn commercial insurance sector and was inviting views from the industry on “how customers are categorised”.
“This would reduce regulatory costs and may increase the competitiveness of the commercial insurance market,” the FCA said.