Reeves will ask UK financial watchdog to prove it will support growth

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Next month, Chancellor Rachel Reeves will issue a formal order to the City of London regulator to demonstrate that it is serious about its duty to support growth.

Reeves will send a formal “transfer” letter to the Financial Conduct Authority by the time she delivers her Budget on October 30, government officials said.

In his letter, Reeves will ask the regulator to demonstrate it is acting to promote the expansion of the UK financial services industry, as the finance minister seeks to boost Britain’s growth rate.

Last year, the previous Conservative government gave the FCA a second brief — to prioritise growth, something the new Labour government has pledged to continue.

Officials said FCA is a “constant source of frustration” for ministers, who criticise the complexity of the regulator’s 10,000-page regulatory handbook and some of its decisions. “They need a bit of a rocket,” said one.

The watchdog said it accepted the legally binding “secondary objective” to support growth and competitiveness and wanted to work with ministers.

Nikhil Rathi, FCA chief executive, told reporters on Thursday that the company “has done a lot” to drive growth and “is always looking to do more.”

An FCA spokesman said it had “put in place a range of measures to support competitiveness and growth” and “looked forward” to receiving a letter “outlining the government’s policy priorities”.

Last month, Reeves said she was pushing regulators to demonstrate they are taking competition in the financial services industry seriously.

By law, the prime minister must assign tasks to the governing bodies related to the government’s economic policy at least once in parliament.

Finance ministers consulted with financial services firms about the regulatory landscape in the UK and shared concerns that the FCA’s rulebook was “complicated, outdated and reducing competition”, according to a person briefed on the discussions.

One flashpoint, which first arose under the Conservative government, was over the FCA’s plans to “name and shame”Companies are being investigated more frequently and at a much earlier stage.

This week’s regulators committed to “increase engagement” in the new regime and “keep in mind all our objectives” including supporting growth.

Another recent confrontation has involved plans by the Payment Systems Authority, an independent subsidiary of the FCA, to introduce a mandatory bank compensation scheme for customers who have been scammed online.

The initial compensation limit was set by PSR at £415,000 but was cut back to £85,000 following pressure from ministers and fintech start-ups, concerned about a blow to finances.

Rathi, who joined the FCA in 2020 after running the London Stock Exchange for five years, said one of the most “far-reaching” policy reforms to support growth was this year’s overhaul of rules for London-listed companies to increase flexibility in areas such as dual-class share structures.

He also cited recent proposals to make it easier for companies to raise capital. raise threshold where they need to issue prospectuses for secondary share offerings; new powers to bar underperforming pension funds from taking on new businesses; and a recent call for suggestions to streamline and simplify the FCA’s rules manual.

The rulebook has been significantly expanded since Brexit as it inherits much of the legislation enacted by the UK government to transpose EU financial services directives.

It is in the midst of a years-long process to rewrite, simplify or eliminate many of these rules, such as the cap on bankers’ bonuses, which have been was canceled last year.

City regulators are also concerned about the shortage of new listings in London.

However, the latest ranking of international financial centers The UK capital retained second place, despite narrowing the gap with leading capital New York, according to Z/Yen.

The FCA will host an international capital markets conference on October 8 in London with the participation of many major industry players from the United States.

More than 22 foreign regulators will attend to discuss the balance between regulation and risk.

The regulator’s growth-supporting mandate is likely to be at the heart of a new three-year strategy it is expected to present early next year.