March was a big month for FCA communication, with two major speeches by its CEO, on March 13 and 14, and the publication of its Business Plan a week later. So, I thought it would be interesting to look at them together as well as individually.

There was a part of me that thought the three would fit together, the two speeches setting up the Business Plan, but instead each was virtually standalone. This isn’t necessarily a problem – after all, the speeches had different audiences – but it doesn’t support the view, sometimes expressed, that the current FCA is more joined up than its regulatory predecessors.

Anyway, I’ve therefore divided this article into two sections, on the speeches and on the Business Plan, drawing out connections where I see them.

Speeches: Like No.8 buses

The first thing to say is that it’s rare for the FCA’s CEO to make major speeches on consecutive days – these ones were about the future of pensions and (the rhetorically titled) Investing in outcomes.

It’s not quite that we’ve been waiting ages before two arrive at once – Nikhil Rathi’s previous speech was January 23. But he made only four speeches in total during 2023 – one of which, at the Mansion House, is effectively mandatory. He has already made three in 2024, so it’s possible that articulating the FCA’s message has become a bigger personal priority for him.

Of course, this proximity may be just a diary issue, or a matter of making sure the speeches get made before any potential election purdah. But the bunching is still interesting.

Place matters

Also unusual is that, as far as I can see from the FCA website, these are the only two speeches, of the c.36 listed since the start of 2023, that were delivered at events sponsored by a regulated firm (as opposed to trade associations, professional services … ). Just as interesting is that none of them seem to have been at an event sponsored by a consumer group.

This is most likely an oversight but it does look odd. The late-stage FSA felt embarrassed about how weak its relationships with consumer groups had become, although it ultimately stepped back from significantly increasing its consumer-focused resources; the early FCA essentially maintained its position of trying to do more with the same. Both, however, would have sought to avoid the optics of giving high profile speeches to investment bank audiences on consecutive days, so the FCA’s current communications’ strategy looks out of step and could cause future problems.

Pensions – inclusions and omissions

This was a very high-level speech, at times extending beyond the FCA’s direct remit, but there were two sections – on the Advice Guidance Boundary Review (AGBR), and on “Tackling fraud, protecting our markets and promoting competition” (an umbrella section) – that included more tangible material.

Within these, the subjects covered fall broadly into two groups:

• (1) the AGBR and Consumer Duty are among the several ambitious, goalpost-shifting attempts the FCA is simultaneously engaged in (see below); and
• (2) more specific areas – including fraud (in the sense it’s talked about here), and Liability Driven Investment (LDI) – where quicker progress might be possible.

Members of the former group tend to appear more frequently in speeches, but progress (or lack of) on the latter is often what reveal a regulator’s real effectiveness.

The omissions are perhaps more stark. In particular, there is no mention of the the FCA’s Joint Regulatory Strategy with the Pensions Regulator (TPR). Launched in Oct 2018, when Andrew Bulley and Lesley Titcomb were the respective CEOs, and emphasising the imperative for joint working, it now seems a lifetime ago. On one level this isn’t surprising – a lot of water has flowed since 2018 and regulatory strategies rarely outlast those who wrote them. But to have zero reference, even if only to explain that time has moved on, still ranks as odd.

Meanwhile, the lack of any reference at all to TPR, other than in the narrow context of LDI, is even stranger as regulators are normally scrupulous about acknowledging each other’s role.

“Investing in Outcomes” – pragmatism and hope

Delivered the week before, a speech as wide-ranging as this would ideally set the scene for the forthcoming Business Plan. However, that this one didn’t do so is not unusual – there has often been a disconnect at the regulator between speech writing and corporate publications, with authors of the former not understanding enough of the detail and writers of the latter lacking rhetorical flair.

What the speech does do is hint at a more realistic approach to what the FCA can achieve, but this is balanced by the continuing hope that it can control the course of events.

An example of the former is the section on the Consumer Duty, which is probably the clearest acknowledgement so far that implementation will, at best, be a long-run campaign. Rather than a flick of the switch, the often-touted idea that the Duty will bring an almost instant shift in financial firms’ relationships with their customers, there is some recognition here that positive results will mostly materialise only through patient and persistent effort over time. And that, while enforcement cases will play an important role, a combination of limited resources, the demands of other priorities, and well-funded defendants dictate that these too will be hard yards.

On the more optimistic side, the section on motor finance claims makes a valiant attempt to argue that, because of the FCA’s action, this will not be like PPI in either the duration or the scale of any redress exercise. Unfortunately, there remain too many unanswered questions to be confident about this, and the plea for firms to cooperate on data indicates some of them might take time to answer.

It’s worth reiterating here that such optimism isn’t new – the PPI redress scheme was originally envisaged to last only a year – and that while the FCA, like any regulator, wants to define the scope of redress exercises in advance, events (and sometimes the courts) often have other ideas.

Incidentally, I was amused to see the reference to the previous day’s speech on pensions – it’s under “Supporting investment and innovation” and looks deliberately dropped in. This explicitly includes recognition of the TPR’s role which had been conspicuously missing from the original.

FCA Business Plan

Pride and prejudice

Priorities are as important to regulators as anyone else. But, because the overall cost of their ambitions cannot be priced accurately, they often give themselves too many and find it harder to follow through on them than other organizations. And when they do follow through it can end badly. The FSA prioritized reforming capital rather than liquidity regulations, while the FCA emphasized policy and competition work over supervision. Both later regretted it.

As a result, scarred by both over-ambitious priorities and the unintended consequences of de-prioritizing, the prejudice of old-school regulators is to keep all the plates spinning as much as possible, while being cautious about the regulator’s capacity to enact dramatic (as opposed to iterative) improvements. They prefer changes of emphasis – for example tone of speeches, targeting of enforcement and thematic work – to broad initiatives.

Questions to ask yourself while reading

With this in mind, there are some key things to look out for in a regulator’s Business Plan:

1. Is resource and/or activity in the identified priority areas going to change substantively from current levels?
2. Are any areas really being deprioritized, as opposed to not having the biggest headlines?
3. Are the overall resources available to the regulator – people, systems and technology, management and governance – enough to carry out the scheduled work?
4. What is the likelihood of (unexpected) events intervening to derail aspects of the plan?

And some tentative answers

We don’t have the detail to reach confident conclusions on the above but there is sufficient, drawing also on past experience, to make some educated guesses. Here are six:

1. It’s good the FCA has prioritized three of its Commitments – the full 13 would be far too many. However, some of this is nevertheless likely to be rhetoric more than reality (see below), and the prioritized Commitments still come with 16 outcomes to be achieved, even the measurement of which will be daunting.
2. With the exception of access to cash – important but only part of the bigger problem – financial inclusion again appears to be side-lined, and its omission from FSMA still feels a mistake.
3. Driven by Government strategy, fraud/scams does genuinely seem to have made it to the top table of priorities. But there is little sign of other types of financial crime – money laundering, terrorist finance, market abuse, cyber, crypto – receiving similar attention. And it still remains doubtful if the FCA’s planned actions, assuming it can follow through, are sufficient to catch up with the fraudsters.
4. ESG (Environmental, Social and Governance) work isn’t one of the top three Commitments, but its structure, resources and management are already in place, while market demand for a regulatory flight path on ESG will only grow. We can speculate why it didn’t make the top tier but its actual importance is likely to grow.
5. The increase in FCA resources – 8.7% (£58m/$74m) for existing activities and 10.7% when “exceptional projects” are included – is far from trivial. And most of those projects are likely to become part of the regulator’s core work in years to come, so the trajectory is firmly upwards.
6. Despite this, the scope of the work set out in the Business Plan has such a high number of large, open-ended initiatives – the Consumer Duty, motor finance redress, and the Advice Guidance Boundary Review, the diversity initiative – that it’s hard to believe the FCA and its management has the required capacity to deliver on all of them.

The outside world: economic and geopolitical landscape

… has a way of messing with regulators’ best-laid plans:

• In 1997, the General Election was followed a week later by the surprise announcement of the FSA’s creation, which involved the bringing together of c.12 regulators in the FSA, including banking supervision being extracted from the Bank of England.
• On August 16 2007, it became clear internally that Northern Rock was likely to go bust.
• In March 2014, the FCA inadvertently made public some market sensitive information ahead of the Business Plan.
• In March 2020, Covid hit the UK.

All of these, including the political and media reaction to them, significantly upended the regulator’s Business Plan of the day. This year will bring a UK General Election (possibly soonish) and, as the Business Plan notes, “the economic and geopolitical landscape remains uncertain”.