Most people would agree that the financial sector has been in dire need of more targeted regulation — and, on the whole, those companies that have always operated ethically would also agree. In a sector tarnished by everything from the LIBOR scandal to consumer scams, tougher regulations should allow firms already meeting or exceeding those standards to get a head-start.
What’s the Background to the Strategy?
Since its foundation in 2013, the Financial Conduct Authority (FCA) has struggled to reform a sector often seen as having significant elements of corruption or indifference to consumers. Even though this is largely because the “bad apples” tend to get more publicity than the honest organisations, many aspects of the sector have needed better regulation.
In 2013, the Parliamentary Commission on Banking Standards noted that “The interest rate swap scandal has cost small businesses dear… If, as they claim, the regulators do not have the power to deal with these abuses, then it is for the Government and Parliament to ensure that the regulators have the powers they need to enable restitution to be made for this egregious mis-selling.”
A New Era of Reform
However, little changed till last year, when new CEO Nikhel Rathi announced a change of approach, which has now developed into a three-year strategy. Under this, the FCA would make better use of data to become more innovative, adaptive and assertive, enabling them “to respond more quickly to the rapidly changing financial services sector…and respond swiftly to economic and geopolitical developments.”
This has led to the FCA tackling a number of issues, including:
- Reforms to the general insurance market, expected to save consumers £4.2bn in the next ten years.
- Changing the discredited LIBOR system.
- Making it easier for small businesses to claim business interruption insurance.
- Launching prosecutions for money laundering.
- Preventing unauthorised forms from advertising on Google for financial products.
What Can We Expect?
There should be plenty more of this over the three-year strategy, and a proactive, reforming FCA is clearly good news for consumers. Richard Lane, Director of External Affairs at StepChange Debt Charity, said “At a time when millions of households are facing rising living costs, it’s heartening to see the proposed laser focus on client outcomes and a strong approach to consumer protection set out in this strategy.”
But what about the financial sector? If you’re a financial company or offering credit for goods, should you be worried?
Well, as I’ve said, as long as you’re already operating ethically, you’re probably already conforming to any new rules. At the same time, it’s going to be even more important than usual to keep up to date with the latest regulations and ensure that you follow them to the letter, in order to thrive in the new environment.
You’re very welcome to give me a call if you want to discuss your company’s financial arrangements.