FCA welcomes Government support for responsible risk-taking, emphasising it cannot operate a zero-failure regime

In response to a letter from the Chancellor of the Exchequer dated 14 November 2024, the Financial Conduct Authority (FCA) has outlined its strategic initiatives and commitments for the coming years.

Our Financial Regulation team has summarised the key points raised in the FCA's response, highlighting the authority's support for the government's financial services growth mission, its strategic focus for 2025-30, and its approach to global cooperation and regulation.

The FCA's plans aim to balance resource allocation, facilitate responsible risk-taking, and establish performance metrics for the financial services system.

A summary of key points raised in the letter:

• The FCA supports the Government's Financial Services growth mission and cites as evidence the upcoming reforms to secondary capital raising and the new market for private company shares (PISCES), the Call for Input on streamlining the Rulebook and the forthcoming consultations for customers to access appropriate advice for pensions and retail investments.

• The FCA strategy for 2025-30 is to focus on supporting growth, tackling financial crime, enhancing customer resilience and improving operational effectiveness by using data and technology.

• The FCA aims to maintain its leading role with global partners and advocate for global co-operation. It will be considering how to approach regulation of global issues such as crypto and sustainable finance.

• The FCA welcomes the Government’s support for responsible risk-taking and wants to facilitate informed and responsible risk-taking by both firms and consumers. It would like a greater degree of consensus on the appropriate risk appetite, recognising there will be different priorities and a diversity of views.

• The FCA seeks recognition that ‘we will never operate a zero-failure regulatory regime’ and to do so would stifle innovation. Where there is a desire for more risk, more things can go wrong, so risk must be proportionate.

• The FCA would like to understand the Government's perspective on issues of compensation and where liability should fall. It would like to improve work with stakeholders in order to manage future mass redress events.

• An ambitious set of performance metrics will be agreed for the financial services system as a whole, to ensure accountability.

These initiatives and aims reflect the FCA's commitment to fostering a robust, resilient, and innovative financial services sector in the UK, which is prepared to take more risk to meet its secondary objective of competitiveness.

If you would like to discuss any of the issues in further detail, please contact one of the authors.