So maybe it’s not as extreme as ‘adapt or die’ but there’s definitely a change in the air. This summer, the FCA issued its 2021/22 Business Plan and having read it through with a fine-tooth comb there’s no denying that change is coming.

The environment in which the FCA is operating changes rapidly as a result of economic, technological and social movements. Throw a global pandemic in there plus a bit of BREXIT and the FCA’s job suddenly becomes overwhelming.

But Nikhil Rathi, FCA Chief Executive is driving ahead with strategic change to ensure that the authority keeps pace with the needs of modern markets and continues to prevent serious misconduct that can have significant global economic impact.

What can we expect from the FCA in the next 12 months?

The organization has invested significant amounts of money in new technology and data use optimization. They’re also going to be working more closely with international as well as UK-based organizations to ensure best practice is adopted and implemented early.

How will they measure success?

Alongside their business plan for the next 12 months they’ve also set clear, quantifiable targets so that they can track progress and stay on track. The FCA has made a commitment to be a more innovative, adaptive and assertive regulator, ensuring accountability for its progress on:

  • Supporting market integrity and sustainable innovation, ensuring firms start with high standards and maintain them,

  • Using new approaches to find issues and harm faster, with £120m invested in its data strategy over the next three years,

  • Tackling misconduct.

  • Enabling consumers to make informed financial decisions, and.

  • Investing in people, reshaping its culture and working with others to achieve more.

How will the FCA better support consumers?

  • Consult on proposed changes to strengthen the rules for firms that approve financial promotions, 

  • Launch a 5-year campaign to inform consumers about high-risk investments and what is and isn’t protected,

  • Publish Consumer Investments Strategy, setting out the work the FCA will deliver for retail investors.

What does their plan for digital financial markets look like?

Information was fairly limited in the plan but the top line is that the FCA is starting to take the need for regulatory solutions more seriously. As a starting point the FCA is:

  • Implementing pricing and automatic renewal remedies in January 2022.

  • Developing a digital markets strategy.

  • Investigating harmful business practices to establish how common and harmful they are to consumers and stop them.

So what does this mean in the short to medium term?

We are expecting some changes of approach to be immediate, but we also expect the FCA to review these changes over the next 12 months. The overarching aim is to set clearer and higher standards for regulated firms' culture and conduct, so that customer interests are put at the centre of business models.

In the longer term, the FCA is aiming to reduce payouts from the FSCS. Ultimately the FCA wants firms to have appropriate capital reserves in the bank themselves to ensure that they can compensate for potential liabilities in-house.

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