The FCA’s CEO, Martin Wheatley, delivered a speech focusing on the importance of supporting vibrant markets to ensure profits for the good firms and exits for poor firms.

Wheatley states that the emphasis at this stage should be on forecasting how regulation should adapt to a more positive future.

The CEO discusses two themes: balancing competition and encouraging financial innovation.

Competition

Competition needs to play out in the interest of both consumer and market. With the FCA gaining competition concurrency powers, which allow them to investigate breaches of the competition act and to refer cases to the Competition and Markets Authority, an important question arises – how can regulators have a bigger impact on competition today compared to past times?

Wheatley points to progress achieved so far:

1. The FCA have reduced barriers to entry for banks, providing pre-application support for firms applying for a banking license.
2. Capital and liquidity requirements are lower due to the FCA introducing a ‘mobilisation option’ which allows authorisation to be granted at a much earlier stage, opening up the market.

In order for competition to work, it must play out in balanced interests of the consmer and the market, with a referee keeping the balance in check.

Behavioural Economics and Competition

There is a growing influence in areas such as behavioural economics in the financial sector.

The FCA recognises the importance of encouraging consumers to realise their power in disciplining the market. In order to achieve a competitive landscape, the FCA has been working closely within the retail banking, insurance and wholesale sectors developing complex pricing strategies and the adequacy and transparency of information presented to customers.

Innovation

The FCA plays a significant role to ensure innovative new products on the market are regulated and that principles of consumer protection are followed. The UK and Ireland are the fastest growing FinTech incubators, it is therefore important that the regulator does not create barriers for innovative technologies to grow.

This is why the FCA brought in its Innovation Hub last October, which provides support to innovators and assists the regulator in adapting the regime to support innovations. .

The FCA is also working on testing new customer engagement approaches, so that firms and the regulator can identify processes and or policies that may need to be altered before the product is accessed by the general public.

For the complete speech from the FCA’s CEO, delivered at the Future of Financial Services event click here.