FCA publishes 2022/23 Business Plan and Three-year Strategy

On 7 April 2022 the Financial Conduct Authority (FCA) published its 2022/23 Business Plan along with a three-year strategy and, for the first time, outcomes and metrics it will be holding itself accountable to. 

The regulator makes 13 commitments under three broad focus areas, which are as follows:  

1. Reducing and preventing serious harm:

• dealing with problem firms – removing firms that do not meet the FCA’s minimum standards from financial services markets;
• improving the redress framework – so it is fairer for consumers and firms in a global context;
• reducing harm from firm failure – to minimise wider fallout;
• improving oversight of Appointed Representatives – to reduce poor conduct;
• reducing and preventing financial crime – by joining up the FCA’s actions across sectors and working with partner agencies on a ‘whole system’ response; and
• delivering assertive action on market abuse – by increasing the resilience of financial services markets and detecting and taking decisive action

2. Setting and testing higher standards:

• putting consumers’ needs first – with a focus on the proposed new Consumer Duty and the outcomes consumers get;
• enabling consumers to help themselves – through targeted action to make sure promotions are clear, fair and not misleading;
• a strategy for positive change – by delivering the FCA’s recent environmental, social and governance (ESG) strategy; and
• minimising the impact of operational disruptions – by testing firms’ resilience to inevitable operational disruptions.

3. Promoting competition and positive change:

• preparing financial services for the future – by tailoring FCA rules to better suit UK markets in a global context;
• strengthening the UK’s position in global wholesale markets – so that the UK is one of the leading markets of choice for issuers, intermediaries and investors alike; and
• shaping digital markets to achieve good outcomes.

When describing how it will address problem firms the FCA mentions, inter alia, that it will hire 80 new employees whose sole role will be to cancel their permissions. In addition, the FCA will conduct a small number of complex Threshold Conditions test cases to determine whether its aims are supported by current legislation and policy and where necessary seek to make changes to support its ambitions. It will also develop an automated approach for identifying simple Threshold Conditions breaches.

In terms of protecting consumers, the FCA confirms that it will publish its final rules regarding the Consumer Duty in July 2022. It plans to embed the Consumer Duty at each stage of the regulatory lifecycle, from authorisation to supervision and enforcement. 

As regarding minimising the impact of operational disruptions, the FCA will launch a discussion on critical third parties later this year with a view to informing a consultation paper in 2023.The Discussion Paper will propose an oversight regime for the supervisory authorities to set resilience standards, a testing approach and enforcement powers for critical third parties. 

In relation to supporting competition, innovation and the UK’s position in global wholesale markets, the FCA will begin a programme of market studies on market data, starting with trade data. It will also review and update the wholesale markets regulatory framework including Primary Market Effectiveness and Wholesale Market Review projects. Further, it will review and develop appropriate regimes with the Treasury for overseas firms to access the UK markets and continue supporting international initiatives.

In its strategy, the FCA describes 2 levels of outcomes:

• Consistent topline outcomes, of which there are 4 that the FCA expects from financial services – fair value, suitability and treatment, confidence and access. 
• Commitment outcomes, for which the 13 commitments (see above) articulate the FCA’s joining up of resources and tools across sectors to deliver measurable outcomes. The FCA’s proposed metrics are related to the commitments and ultimately linked to the topline themes.

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