Regulatory bodies urged to foster a more adaptable, swift-moving regulatory landscape
The Financial Conduct Authority (FCA) is set to play a pivotal role in fostering sustainable, innovation-led growth for the UK economy. Recognising that well-calibrated regulation can protect consumers and stimulate economic growth, the FCA's evolving mandate includes facilitating the international competitiveness and medium-to-long-term growth of the UK financial services sector, a key pillar contributing over 8% of the nation's GDP[1].
Insights from the FCA's recent economic research competition reveal the regulator's vision of regulation as a platform for innovation and competitiveness. This involves creating an agile regulatory environment that supports emerging technologies, such as fintech, cryptocurrencies, and distributed ledger technology, which have thrived under clearer regulatory frameworks and institutional engagement[1][2]. The FCA's initiatives also aim to advance sustainability goals, including implementing sustainability disclosure requirements and aligning climate-related financial rules with international standards to establish the UK as a global hub for sustainable finance[3].
The FCA's strategy includes unlocking capital investment—through reforms like the simplified listings regime and new prospectus rules—to stimulate real economy growth and facilitate access to finance for smaller and growing enterprises[3]. The regulator works alongside other authorities like the Bank of England to ensure financial stability while encouraging safe innovation, such as through the Digital Securities Sandbox and AI risk management in finance[2].
Research from the FCA's economic research competition offers a roadmap for how financial regulation can contribute to a more productive, resilient, and inclusive economy. Deeper co-operation between regulators and trade bodies could help amplify the UK financial services' global brand, especially in emerging fields such as green finance, digital assets, and Environmental, Social, and Governance (ESG)-aligned investment[4].
However, the FCA must balance enabling innovation with safeguarding financial stability. Regulatory clarity and institutional engagement have often fostered innovation in the financial sector[5]. The Universities of Edinburgh and Westminster reported that since Brexit, export competitiveness has declined, while outward foreign direct investment surged into EU centers like Germany and the Netherlands[6].
The FCA's new secondary objective to facilitate the international competitiveness and growth of the UK economy is a call to action to embed growth considerations into the regulatory DNA and reshape financial services as a catalyst of long-term, inclusive, and internationally competitive growth[7]. Interested readers can find more information about OMFIF's work on this topic by subscribing to their newsletter.
The evolving financial landscape requires updated, dynamic monitoring tools and a regulatory approach that understands the potential of non-bank financial entities to transmit or amplify shocks[8]. OMFIF has collaborated with EY to explore how to improve public finance management, with this year's project focusing on how governments can more effectively allocate public funds to support better fiscal, economic, and societal outcomes[9].
[1] Financial Conduct Authority. (n.d.). Our mission. Retrieved from https://www.fca.org.uk/about/our-mission [2] Financial Conduct Authority. (n.d.). Regulatory sandbox. Retrieved from https://www.fca.org.uk/firms/innovate/regulatory-sandbox [3] Financial Conduct Authority. (n.d.). Sustainable finance. Retrieved from https://www.fca.org.uk/firms/market-development/sustainable-finance [4] Financial Conduct Authority. (n.d.). Research competition. Retrieved from https://www.fca.org.uk/publications/research/economic-research-competition [5] Financial Conduct Authority. (n.d.). Regulatory clarity. Retrieved from https://www.fca.org.uk/firms/innovate/regulatory-clarity [6] Universities of Edinburgh and Westminster. (2021). Brexit's impact on the UK economy. Retrieved from https://www.ed.ac.uk/news/2021/brexit-impact-on-uk-economy [7] HM Treasury. (2021). Financial services and the UK's future economic growth. Retrieved from https://www.gov.uk/government/publications/financial-services-and-the-uks-future-economic-growth [8] Bank of England. (2021). Non-bank financial intermediation. Retrieved from https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2021/march/non-bank-financial-intermediation [9] OMFIF. (n.d.). Public finance management. Retrieved from https://omfif.org/public-finance-management/
- The Financial Conduct Authority (FCA) aims to foster sustainable, innovation-led growth for the UK economy, recognizing that well-calibrated regulation can protect consumers and stimulate economic growth.
- The FCA's economic research competition reveals insights into regulation as a platform for innovation and competitiveness, creating an agile regulatory environment for emerging technologies like fintech, cryptocurrencies, and distributed ledger technology.
- The FCA's initiatives include reforms to unlock capital investment, stimulating real economy growth and facilitating access to finance for smaller and growing enterprises.
- The FCA works alongside other authorities like the Bank of England to ensure financial stability while encouraging safe innovation, such as through the Digital Securities Sandbox and AI risk management in finance.
- Research from the FCA's economic research competition offers a roadmap for a more productive, resilient, and inclusive economy, with deeper cooperation between regulators and trade bodies amplifying the UK financial services' global brand.
- The FCA must balance enabling innovation with safeguarding financial stability, as regulatory clarity and institutional engagement have often fostered innovation in the financial sector.
- The FCA's new secondary objective to facilitate the international competitiveness and growth of the UK economy is a call to action to embed growth considerations into the regulatory DNA and reshape financial services as a catalyst of long-term, inclusive, and internationally competitive growth.
- The evolving financial landscape requires updated, dynamic monitoring tools and a regulatory approach that understands the potential of non-bank financial entities to transmit or amplify shocks.
- OMFIF has collaborated with EY to explore how to improve public finance management, focusing on how governments can more effectively allocate public funds to support better fiscal, economic, and societal outcomes.
