The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) recently published reports detailing their progress on the newly introduced secondary competitiveness and growth objectives under the Financial Services and Markets Act 2023. These include reporting against the metrics HM Treasury published to measure the effectiveness of both regulatory bodies.
Early days but promising signs
Both the FCA and PRA have indicated that they are in the early stages of implementing the objective, with the FCA saying ‘it is too early to establish if we are succeeding’.
However, both can rightly point to a range of initiatives demonstrating their progress against the objective. For example, their respective authorisations teams have made notable improvements, addressing a key issue for the industry highlighted in our report on ‘Improving regulatory efficiency on authorisations’.
What does their reporting tell us?
This is the first year that the regulators have had to report against these metrics, and lack of historical context makes it difficult to judge overall success; for example, nobody knows yet what constitutes a ‘good’ number of new entrants. Time will tell as we monitor progress over the years and there are benchmarks or reference points in place.
For now, the commentary in the reports provides valuable insights and probably tells us more than the numbers. Forewords by Nikhil Rathi of the FCA and Sam Woods of the PRA strike different notes. The FCA calls for a mature debate about the risk appetite in our society, stating “let us not be so afraid of failure that we stifle innovation”. It also calls for collective action focused on long-term vision from those who hold other levers underpinning international competitiveness and growth such as tax, skills and physical and digital infrastructure.
On the other hand, the PRA focuses on its demonstrable track record of engagement and research on the objective, as well as the conclusions of the Bank of England Independent Evaluation Office (IEO) report on the PRA’s approach to its secondary objective. In short, a “well done”, with some encouragement to do even better.
Actions speak louder than words
It may be something of a cliché, but actions do speak louder than words. With a new government agenda in train, there is a pressing need for the FCA and PRA to actively, meaningfully and demonstrably apply this objective to their strategies, operational activity and reform proposals.
And there needs to be recognition that a misstep, for example, the recent controversial proposal from the FCA on its approach to enforcement investigations, could potentially damage the UK’s competitiveness.
Looking forward
Collaboration and communication will be key. The financial and related professional services industry must maintain close dialogue and continue to engage with the FCA and PRA to ensure early insights and contributions to policy reforms are shared. Their actions alone will not ensure international competitiveness and growth, but they can have a significant impact on this goal if they are delivered effectively. The industry is determined to work in partnership with the regulators and government to ensure we contribute to a shared financial system that not only supports but also stimulates individual prosperity, economic growth, and benefits our wider society.
