The Intermediary – May 2025 - Flipbook - Page 40
RESIDENTIAL
Opinion
Is it time for
a change?
E
arlier this year, a House
of Lords commiee
delivered a damning
verdict on the Financial
Conduct Authority’s
(FCA) much debated
‘naming and shaming’ plans.
Consultation on the regulator’s
proposed policy to publish the names
of companies under investigation
was called an ‘abject failure’ by the
House of Lords Financial Services
Regulation Commiee, which
advised that the plan be dropped until
‘poor engagement’ over the issue
was addressed.
The commiee noted that the
average duration of FCA investigations
was around three to four years, with
no further action taken in 56% of
cases, observing that if the regulator
pressed ahead with its proposals,
half of the firms it investigates – and
the people involved – could have
their reputations unnecessarily and
unfairly damaged. This, it said, was
not acceptable.
The Lords report followed last
November’s FCA announcement
of plans to explore new areas of
compliance. FCA chief operating
officer Emily Shepperd put the
industry on notice that – together
with the Prudential Regulation
Authority (PRA) – the regulator
wanted to move into ‘non-financial
compliance’, to include diversity,
equity and inclusion (DEI) goals such
as ‘healthy organisational cultures’, by
bearing down on ‘toxic behaviour’ and
meeting targets.
Many are relieved that in the
past few weeks – and in response to
considerable industry pushback – the
FCA has backtracked on both these
initiatives. It has cancelled its ‘naming
and shaming’ plans and shelved its
DEI moves, citing in both cases a lack
of consensus.
Despite this apparent course
correction, however, some say such
initiatives highlight a broader issue:
that of bureaucratic overreach.
Broader horizons
Since its inception, the FCA’s direction
of travel seems to have involved a
steady widening of its remit to cover
ever more areas of compliance. If it is
willing to consider such frameworks
based on unsatisfactory consultation,
who is to say that this may not occur
again in the future? Some note,
ominously, that the FCA intends to
publish a policy statement on ‘nonfinancial misconduct’ later this year.
Their worry is shared by Kemi
Baddenoch, leader of the Tory Party,
who while in Government said that
the benefits of probing non-financial
compliance claimed by the FCA were
“speculative” and such objectives
“were a distraction holding back
regulated firms from priorities such
Many are relieved that the regulator shelved its ‘naming and shaming’ plans
38
The Intermediary | May 2025
DAVID WYLIE
is commercial director
at LendingMetrics
as delivering economic growth and
improving services to consumers.”
She went on to warn that such plans
could hamper any Government’s
efforts to prioritise growth in the
sector, one of the few in which the UK
has international leadership.
It can’t have escaped her notice that
oversight comes at an increasing heavy
cost to the industry in the form of fees
and fines. The FCA’s annual funding
requirement jumped by almost £100m
between 2021/22 and 2022/23, from
£587.5m to £684.2m.
Baddenoch, along with everyone
else, will be aware that the chief
competitor of UK financial services,
the US, is embarking on a new era
of lighter-touch regulation. A recent
Trump Executive Order has even
banned the mandating of DEI by
federal institutions.
Would the regulator’s resources
not be beer focused on creating
frameworks that foster growth in the
financial services sector, rather than
those set to load additional compliance
costs on firms?
What about reducing application
decision times that can currently be up
to one year for more complex cases?
Perhaps, provide more assistance with
the complicated application process.
This might be helpful, considering
the operating license rejection rate
seems to be rising – to one in four
applications in 2022/23 from one in
five in 2021/22.
Given that boosting economic
growth is Labour’s claimed primary
goal, we can only hope City Minister
Emma Reynolds encourages the
regulator to focus more on allowing
the industry freedom to realise its
full potential, while at the same time
ensuring that consumer interests are
safeguarded. ●
