(Bloomberg) -- A top UK financial regulator warned that a new directive to help the government improve the country’s global standing might prove difficult to pull off in some areas.
The UK’s Financial Conduct Authority is under pressure to deliver internationally competitive rules for firms it oversees, but faces the prospect of major jurisdictions such as the US and European Union going in different directions. Two areas where it might diverge from its peers around the world are green finance and cryptoassets, the agency’s leaders said in a letter to Chancellor of the Exchequer Rachel Reeves seen by Bloomberg.
“We agree that the financial services sector is fundamental to delivering the government’s growth mission,” Nikhil Rathi, the FCA’s chief executive, and Ashley Alder, the agency’s chairman, said in the letter on Tuesday. “We will advocate for global cooperation and openness, while acknowledging that this may be an increasingly hard argument to make and, on some issues, we may choose initially to make progress with a smaller group of like-minded jurisdictions.”
The missive came in response to a new remit letter that Reeves sent the FCA last month that gave it clearer direction on how the watchdog should meet an objective imposed last year to improve the country’s global standing.
The FCA has faced blowback recently, including from parliamentarians who last month accused it of incompetence, financial firms that say it is holding back innovation and the Labour government, which is counting on the agency and other regulators to help it spur growth across the country.
Reeves has been especially vocal about her feelings that the UK’s crackdown on banks in the wake of the global financial crisis has gone too far and used her inaugural Mansion House speech to the City of London last month to vow to give the country’s watchdogs new marching orders to ensure they’re focused on growing the economy.
In their letter on Tuesday, Rathi and Alder pointed to measures the agency is already taking to boost growth, including capital markets reforms and consulting on changes to the pensions regimes.
The two argued that deregulatory changes to the FCA’s regime will increase risk, which should be acknowledged and debated by Parliament. The way the FCA is held accountable should also be aligned with that change, they said.
They requested more clarity on the government’s perspective over redress for consumers. That comes as many in the financial services industry have warned that the uncertainty around lawsuits and regulatory probes into historic practices in motor finance is making it difficult for investors to have confidence in British banking. Moody’s Corp. analysts have said the total cost for the industry could ultimately reach £30 billion.
“Improving how we work with stakeholders to manage any future mass redress events will also help us make sure that we can support both more informed risk taking and consequently greater trust and confidence in the UK’s financial markets,” Rathi and Alder said.
The agency’s pledge to streamline its rulebook by removing duplicative rules has yielded 170 responses from industry participants expressing “mixed views.”
While some firms favor a reduction, others prefer the agency’s current, more prescriptive approach to reduce their own operational risk, one person familiar with the matter said. Others do not want any changes to be made quickly, the person said, asking not to be identified discussing non-public information.
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