FCA is not “anti-innovation”, claims Rathi
Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA) said that the regulator is not “anti-innovation”, but is working instead to minimise consumer harm.
In a speech to mark City Week 2022, Rathi (pictured) warned that the cost of living crisis means that consumers are becoming more reliant on financial services, which could potentially place them at higher risk.
“Our economy already faced rising inflation on the back of the economic recovery emerging from the pandemic,” said Rathi.
“War was then visited on Ukraine by Russia, with the resulting aftershock for commodity and agricultural prices, rippling down to wholesale markets, firms and consumers.
“Inflation is set to reach a 40-year high this year with energy bills rising much faster than wages. Those least able to bear the rises will be hit the hardest.
“Our own data shows that over a quarter of UK adults have low financial resilience. Cost of living challenges mean consumers are more exposed to risk while also being more reliant on financial services.”
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Rathi highlighted crypto companies and other high-risk investments as representing a particular threat.
“Alongside encouraging innovation and having an open mind to new technologies, we need checks and measures that to protect our system and consumers from serious financial crime,” he said.
“Minimum standards expected of firms we regulate – and some we don’t – from notaries to estate agents to make sure firms are not used to funnel money to fuel crime, terrorism or war.”
He noted that 33 crypto firms have so far been registered under the FCA’s anti-money laundering rules, but added that “many were rejected as they had inadequate provision to prevent harm or even identify it in the first place.”
“We worked with many firms to help improve their capabilities instead of just rejecting or approving with no feedback or advice,” said Rathi.
“But those that couldn’t or wouldn’t meet the standards didn’t make it through. This should not be interpreted as anti-innovation.
“Rather for innovation to endure and benefit consumers as well as entrepreneurs and investors, it cannot trade off against basic expected standards.”
The upcoming new consumer duty should help to address these concerns, he added.
The new consumer duty was first mooted in December 2021. It states that “a firm must act to deliver good outcomes for retail clients.”
Rathi said that he expects the consumer duty to be finalised by the end of July. After this, he anticipates fewer future rule changes, which should lower costs to firms.
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