FCA highlights ‘delicate balance’ to ensure growth and market integrity

Anthony Harrison, financial services expert at Pinsent Masons, was commenting on a recent speech by FCA chief executive Nikhil Rathi. In his comments, Rathi emphasised the need for a financial ecosystem that is not only globally competitive but also rooted in trust, transparency, and innovation.

“Mr Rathi’s speech highlights the very delicate balance needed to ensure competitiveness and growth while maintaining integrity and high standards across UK financial services,” said Harrison.

The UK aspires to be the world’s most innovative full-service financial centres by 2035. Financial services contribute £214 billion gross value added (GVA) to the economy, with leading sectors such as banking, insurance, and fintech. However, there are a range of challenges faced by these sectors, including market interconnectedness amplifying shocks, diverging international standards, and increasing global competition.

To tackle these challenges, the FCA has advocated for ‘outcomes-based’ regulation to better support growth, innovation and accountability. So far, reforms have set out to streamline processes for capital raising, such as listing reforms enabling transactions and the launch of the private shares trading venue PISCES. Further upcoming changes include reducing securitisation frictions, reforming prospectus requirements, and simplifying investment advice to encourage long-term investments.

Rathi set out the FCA’s aim of fostering a more open approach with firms, grounded in trust and shared problem solving. For instance, initiatives like the FCA’s artificial intelligence (AI) lab allow firms to test innovations safely, with feedback shifting away from streamlining regulations to building confidence and scaling innovation responsibly. This approach aims to strike a balance between regulatory oversight and fostering industry competitiveness, according to the FCA chief.

The FCA has also acknowledged past criticisms of being overly risk-averse, outlining steps to address them. Changes include the introduction of the consumer duty and proactive measures against financial crime. The FCA has also proposed shifts such as retiring the mortgage charter and considering differentiation in wholesale and retail market regulation, setting a goal of giving long-term confidence to firms and consumers while balancing risk and growth.

Harrison said: “The FCA appears keen to challenge criticism that it has been too risk averse in the past by championing some bigger initiatives it has implemented in recent years, such as the consumer duty and various successful actions taken in the financial crime space. However, clearly there is more to be done with the government keen to see more growth and less burdensome regulation. Mr Rathi’s comments on retiring the mortgage charter and being open to clearer client classifications applicable to investment firms signal a desire on the regulator’s part to keep pushing forward that growth agenda.”

Additionally, data prioritisation through new proportional data requirements was noted by Rathi as well as emphasis on the importance of market integrity. Rathi said that compromising standards for competitiveness is not an acceptable approach. Future opportunities were also highlighted by the FCA chief, including the UK’s potential to lead in areas such as tokenisation, appealing to younger, tech-savvy investors.

Harrison said: “Leveraging data in a smart, efficient way will play a key part in ensuring the regulator’s growth objective. It is not a surprise that the ‘p’ word, ‘proportionate’, has been cited again by Mr Rathi, as it has been by other senior FCA figures in recent speeches. It speaks, again, to the balancing act that is needed but should not be taken to mean that the regulator will be easing off on data requests.”

“Context is everything, and in certain areas, Mr Rathi has made it clear that visibility matters. With visibility come the need for the right data being produced at the right time to meet regulator requests as they come up, especially in periods of market volatility,” he said.