January 27, 2025

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by: kiran

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Tags: "Regulation"

FCA and PRA Outline Strategies for Growth and Competitiveness in the UK

The FCA and PRA have considered the Chancellor’s comments on growth and competitiveness in the UK. In response, both regulators published letters to the Prime Minister, Chancellor, and Secretary of State. These letters highlight actions already taken, such as removing unnecessary regulation, implementing the Solvency UK Prudential Regime, and reviewing the SM&CR. They also outline new proposals to support growth. Here are the key takeaways:

FCA

  • Unlocking Capital Investment and Liquidity: Introducing a new prospectus regime, easing retail access to corporate bonds, and fast-tracking a review of capital requirements for specialised trading firms to enhance liquidity.
  • Accelerating Digital Innovation: Progressing a UK financial services digital infrastructure plan, advancing a digital securities sandbox, and introducing variable recurring payments as a new open banking payment method.
  • Reducing the Regulatory Burden: Streamlining the regulatory handbook, increasing flexibility within the Senior Managers and Certification Regime, and simplifying responsible lending and advice rules for mortgages.
  • Making it Easier for Firms to Start Up and Grow: Digitising the authorisation process, assigning dedicated case officers for firms in the regulatory sandbox, and offering support to more early and high-growth firms.
  • Improving Exports and Inward Investment: Establishing a presence in the United States and Asia to promote the UK as a destination for firms seeking authorisation and for those looking to export.

PRA

  • Increasing the Ability of the Insurance Sector to Invest in the UK Economy: Lowering investment barriers for insurance firms, enabling them to deliver on commitments to additional UK investments more swiftly.
  •  Improving the Framework for Insurance Special Purpose Vehicles (ISPVs): Enhancing the attractiveness of establishing ISPVs in the UK, offering diversification opportunities for investors and new sources of capital and reinsurance capacity.
  • Concierge Service for New Inbound Foreign Firms: Proposing a ‘concierge service’ to guide foreign firms considering locating new businesses in the UK.
  • Rationalising the UK Financial Services Regulators’ ‘Have Regards’: Reviewing and simplifying the growing number of principles the PRA is required to consider, reducing complexity in future regulatory analyses.

A key focus area for the insurance industry will be reducing the regulatory burden. Both the FCA and PRA have expressed a commitment to removing unnecessary regulation and reducing data demands on firms. The FCA, in particular, is proposing to eliminate the requirement for a Consumer Duty Board Champion now that the Duty is fully in effect.

What Firms Should Do

Firms should closely monitor these developments while maintaining compliance with existing standards. Although simplification may reduce regulatory pressure, it also introduces risks. Firms must ensure their actions are well-documented, with clear justification for decisions in the context of customer and economic interests.

The FCA believes firms have successfully integrated Consumer Duty principles into their governance, deeming the Board Champion role unnecessary. However, Boards and Senior Management remain collectively responsible for ensuring these principles are embedded across operations and culture.

How We Can Help

If you would like to explore the implications of these regulatory updates or gain insight into Padda Consulting’s perspective on potential changes, feel free to reach out. We’re here to support you in navigating the evolving regulatory landscape.