"The new FCA chief is signalling that he wants to create a very different sort of regulator"
Speaking to City Regulators at Mansion House yesterday, Rathi - who has been in post since October - acknowledged that wokers on the front line of financial services had kept vital services available in rapidly changing circumstances amid the Covid-19 pandemic this year.
Rathi then went on to address what he said was the 'significant logistical challenges' ahead, including transitioning from LIBOR to different interest rate benchmarks, as well as 'long running issues reshaping financial services', such as generational wealth gaps and increasing pressure on financially vulnerable consumers.
The regulator's 'ambitious' transformation programme includes investing in a more digital and data-enabled approach, which it said would ultimately result in 'a lower total cost of regulation for well run financial services firms'.
Rathi also acknowledged that financial services firms, particularly smaller firms, had been affected by the effects of the pandemic, adding:
"Ultimately, we can’t intervene to stop firms from failing in the face of economic distress and sadly we do expect a significant number of regulated firms, particularly smaller firms, to fail in the months ahead, but it is our job to ensure that where this happens, the resulting harm and loss to their customers and the wider financial system is kept to a minimum."
Brexit and its effect were also covered in the speech - with Rathi assuring the regulator was doing what it could to avoid disproportionate negative effects on savers and pensioners - as well as a commitment to working on diversity and inclusion and a requirement for firms to disclose the effects of climate change on their business.
Rathi concluded:
"Transformation of the FCA and the way that we work will underpin all of our efforts – maximising our use of data and technology, making the FCA more diverse so that we can bring a full range of perspectives and ideas to our work, and using the lessons of this extraordinary year to build on the best elements of our organisational culture. This will allow us to deliver more for consumers, firms and markets by making us as effective and efficient as we possibly can be."
Nick Bayley, managing director within Duff & Phelps' Compliance and Regulatory Consulting practice, commented: “Crisis is almost always a catalyst for regulatory change, so it is unsurprising to hear the new FCA chief talk about his intention to ‘transform’ his organisation. Of course, achieving such a transformation will be no easy task given the huge amount of day-to-day authorisation, supervision, policy-making, monitoring and enforcement the FCA juggernaut has to do”.
“The new FCA chief is signalling that he wants to create a very different sort of regulator; one that is more diverse, technology-focussed and flexible. That will require significant investment, particularly in terms of bringing in new talent with quite different skills. That kind of genuine transformation doesn’t happen overnight and it doesn’t come cheaply.”
