What Next for the FCA?

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We've been seeing a lot of talk about the FCA's aims/role potentially "changing" (or at least the conversation inferring this) to be more of a growth driver. This is also reflected in their general push for more AI. What does this mean, and if/how do compliance leaders see this changing compliance activities internally?

For instance, regarding the changes to Consumer Duty, do leaders foresee this being watered down under this new approach or consolidated further? Are there any key questions missing from the debate generally?

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Balancing Growth and Consumer Protection

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Recent discussions in the financial sector have centered on a potential shift in the Financial Conduct Authority's (FCA) role, with increasing emphasis on driving economic growth alongside its traditional consumer protection mandate. This evolution comes amid governmental pressure for regulatory bodies to demonstrate their value and effectiveness in supporting the UK's economic ambitions.

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The Growth Agenda: More Than Talk?

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The FCA's recent communications and actions suggest a genuine attempt to balance its core consumer protection role with supporting market growth. A particularly telling sign is the FCA's head's letter to the Prime Minister, which outlined various levers available to reduce regulatory burden. This revelation has sparked both optimism and concern among compliance professionals, with some noting that the FCA has long been aware of its potential growth-limiting impact.

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Consumer Duty: Evolution Rather Than Revolution

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Despite speculation about the potential "watering down" of regulations, industry experts largely agree that the Consumer Duty (CD) framework will likely remain robust. As one compliance leader points out, "Good outcomes for customers should, in theory, enable growth, not prohibit it." Instead of wholesale changes, we might see:

• A shift toward principles-based regulation, with future consultations considering whether CD is sufficient before introducing new rules
• Simplification of the existing rulebook rather than significant deregulation
• Potentially softer tone and less intrusive oversight while maintaining core standards

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The AI and Technology Push

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A significant aspect of the FCA's evolving approach is its embrace of technological innovation, particularly AI. This is manifesting in two key areas:

1. Internal modernisation: The FCA is working to make its handbook more AI-readable, acknowledging current challenges in this area
2. Industry guidance: Maintaining robust standards for AI implementation, particularly in areas like financial promotions

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What This Means for Compliance Teams

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For compliance professionals, these changes suggest several key considerations:

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Immediate Impact

• Less frequent regulatory upheaval, potentially providing more stability for compliance planning
• Continued focus on consumer outcomes, but with possible streamlining of documentation requirements
• Need to maintain strong consumer protection measures while adapting to a more growth-oriented regulatory environment

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Looking Ahead

• Potential shift from rigid rule-following to more principles-based compliance approaches
• Increased emphasis on technological solutions, particularly in areas like AI-driven compliance monitoring
• Need to balance efficiency gains against maintaining robust consumer protections

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Key Questions for the Future

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Several critical questions remain in this evolving landscape:

1. How will the FCA practically balance its dual mandate of consumer protection and growth promotion?
2. What areas of the rulebook might be simplified, and how will this impact day-to-day compliance operations?
3. How can firms best prepare for increased AI adoption while ensuring compliance with existing and emerging regulations?
4. Will the move toward principles-based regulation result in less bureaucracy or shift the compliance burden?

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The Bottom Line

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While change is certainly coming to the FCA's approach, it is more evolution than revolution. The core focus on consumer protection remains, with a renewed emphasis on efficiency, technological advancement, and supporting market growth. This suggests a need for compliance teams to stay agile and forward-thinking while maintaining robust consumer protection frameworks.

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The key to success will likely lie in finding the balance between promoting innovation and growth while ensuring appropriate consumer safeguards remain in place. As one industry expert noted, perhaps somewhat wryly, "Good luck with getting HMG providing clarity on which consumers get less protection..." This tension between growth and protection will likely define the compliance landscape for years to come.

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