The FCA says in its business plan it will invest £5.3m in Consumer Duty to ensure it is ’embedded effectively’

Investing heavily in Consumer Duty and requiring 20,000 regulated companies to begin reporting on their financial resilience will be among priorities for the FCA over the next 12 months.

The regulator has today (5 April 2023) published its Business Plan 2023/24, which outlined its plans to become more “assertive, adaptative and innovative”.

It also provided details on the regulator’s key priorities and scheduled specific activities for the upcoming year, building on its three-year strategy announced in April 2022.

Speaking about the plan, FCA chief executive Nikhil Rathi said: “With consumers across the UK struggling with the cost of living and markets events causing concern, we’ve put vital changes in place, meaning we’re better set up to face these challenges.”

Consumer Duty

Among operational objectives for the FCA in the upcoming year were securing an appropriate degree of protection for consumers and protecting and enhancing the integrity of the UK financial system.

The release of the plan comes amid rising interest rates and elevated inflation, with the regulator highlighting that it wanted to make sure firms “treat customers fairly, support those in difficulty and give them the information they need to make good decisions”.

It said the Consumer Duty, which comes into force on 31 July 2023, would play a “key role” in underpinning that work.

The Consumer Duty regulation sets out a slew of updated regulations for insurance firms and other financial services firms that must be implemented.

It includes requirements to end “rip-off” charges and fees and provide helpful and accessible customer support, among other outcomes based on a new standard of fairness.

In its business plan, the FCA said it would invest £5.3m in Consumer Duty to ensure it was “embedded effectively”.

It added the additional funding assigned to Consumer Duty “will allow us to undertake sector-specific supervisory work, focused on the priorities detailed in our sector and portfolio letters”.

“Through targeted multi-firm work, for example on fair value and sludge practices, we will identify, assertively supervise and effectively enforce against activities which undermine effective competition and good consumer outcomes,” it added.

Protecting customers

The FCA also said it would introduce a new regulatory return, which will require 20,000 solo regulated financial services firms to provide a baseline level of information about their financial resilience.

The new requirments form part of the FCA’s plan to minimise harm and loss to customers.

“This is a key step in embedding a data-led approach that helps us better identify financial and other stresses which may cause firm failure,” the regulator said.

“While firms will always carry a risk of failing – and it would be inconsistent with our new secondary objective to seek to operate a zero-failure regime – we expect them to be financially resilient and recover quickly from disruptions.”

Other commitments

As part of the business plan, the FCA also highlighted the commitments it would focus on where additional resources were available.

These included preparing financial services for the future by working with the treasury to implement a new regulatory framework and putting consumers’ needs first to improve consumer protection and standards for all consumers.

Reducing and preventing financial crime and strengthening the position of the UK financial services sector in global wholesale markets were also highlighted by the FCA as objectives.

“We have prioritised our work for 2023/24 to ensure we direct our resources most effectively,” it said.

“While we will continue to deliver across all our commitments at a similar pace as year one, we have decided to invest even further in our most critical commitments over the coming year.”

The FCA has also been recruiting to help deliver its strategy, with headcount growing from around 3,800 at the beginning of 2022 to nearly 4,500 at the end of March 2023.

Hugh Savill, senior adviser of Sicsic Advisory, said the business plan was emblematic of “consistency and continuity”.

“The regulator has stated its ambition to be a more assertive regulator in its three-year strategy last year and now they intend to do it,” he added.

“The FCA now has the resources to reach your door, with staff numbers going up from 3,800 to 4,500. They also have the local reach, opening more regional offices.

“Although the business plan is generic, covering all financial services firms, the general insurance market should sit up and notice some key points.”