HM Treasury consulted on cross-cutting financial services regulation reforms and proposals to require the Financial Conduct Authority (FCA) to produce a long-term strategy and ‘streamline’ its obligations to have regard for the strategic objectives set in the Financial Services and Markets Act 2000 (FSMA).
We agreed that it could be helpful to require the FCA to produce a long-term strategy. We see merit in a responsibility on the FCA to formalise and strengthen its approach to developing a long-term strategy to build on the regulator’s strengths and support a more strategic approach to regulation. The long-term strategy should be a plan that clarifies how the FCA will meet its statutory objectives including the ‘have regards’.
The FCA has made good progress in addressing sources of harm in the consumer credit market while supporting a thriving market that meets the needs of most consumers. Less good progress, however, has been made in addressing some significant longstanding consumer harms and unsecured credit remains a significant driver of preventable problem debt.
The current regulatory approach can lead to a low appetite for strategic interventions to address entrenched cross-cutting problems like harmful financial difficulties journeys in consumer credit, and difficulty progressing action on issues where wider public policy and regulatory policy interact such as financial inclusion or the challenge of supporting victim-survivors of economic abuse.
We would like to see a long-term strategy that is framed and structured in a way that drives a strategic regulatory agenda without reducing the flexibility the FCA must demonstrate to respond to emerging regulatory and consumer protection issues, including:
- identifying and acting on strategic consumer protection priorities and themes;
- a clear outcomes framework, using objective data wherever possible; and
- identifying problems that fall to some degree within the FCA’s regulatory emit but require joint action with government or other regulators and quasi- or non-governmental bodies (and progress action alongside those organisations so far as possible).
We do not support the government’s proposal to ‘streamline’ the requirement for the FCA to have regard to principles in the FSMA that clarify the intent of its strategic objectives by linking these to the regulators’ long-term strategy. This risks downgrading consumer protection and other important ‘have regards’ (which would have greater consequences for consumers affected by socio-economic disadvantage and/or in vulnerable circumstances) and weakening the strategic coherence of the FCA’s approach.