fca strategy and business plan

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FCA’s Strategy and Business Plan 2022/23

A summary of the FCA’s new look three year strategy and associated business plan for 2022/23.

The FCA has published its 2022/23  business plan  and  strategy . The new three-year strategy and annual plan are designed to help firms understand the areas of focus for the regulator, the risks and harms it is concerned about and its upcoming work plan.

Despite it being only nine months since the FCA published its three-year strategy in July 2021, the FCA has fundamentally revisited its approach and the associated business plan.  It has taken a more holistic and outcomes-focused approach than has been seen previously — the strategy and plan feel very different to what has gone before.

However, close inspection of the details reveals that they are closer to a repackaging of existing commitments rather than a seismic shift or change of focus. The key step change is the degree of accountability and the granularity of the  metrics  that the FCA will use to measure its progress. The strategy will now be fixed for the next three years to enable the FCA to assess how well it is performing against its areas of strategic focus.

Within its new strategy, the FCA has set out:

• Three areas of focus (reducing and preventing serious harm, setting and testing higher standards and promoting competition and positive change). 
• Four consistent topline or overarching outcomes, fair value, confidence, access, and suitability & treatment. The first three apply to both wholesale and retail, whilst the last only applies to retail.
• Thirteen commitments which will drive specific regulatory activity over the next three years. The specific activities that the FCA intends to perform this year to deliver these commitments are captured in the Business Plan.

Additionally, the FCA provides an update on its transition to a data-led regulator, its national locations strategy, and its ongoing commitment to improving its diversity and inclusion.

A re-focused and articulated strategy

A business plan focused on desired outcomes, increased fca accountability via formal metrics, fca assesses its own positive impact.

• FCA increases its funding requirement

To illustrate its movement away from being process-focused to results-focused, the FCA has re-articulated its strategy via the outcomes it expects all firms to deliver. The new three-year strategy is intended to drive focus on:

• Reducing and preventing serious harm
• Setting and testing higher standards
• Promoting competition and positive change

Underneath these areas of focus, the FCA has captured what it terms 'consistent topline outcomes'. This are overarching outcomes which cut across all sectors. This approach is designed to enable the FCA to combine its capabilities to address concerns and opportunities efficiently, effectively and consistently.

Finally, the FCA has set out thirteen underpinning commitments detailing activities that it will undertake and how it will measure its impact.

The FCA's associated business plan has a stronger alignment to the FCA's strategy than we have seen previously and it flows directly from it. Essentially, the business plan explores each of the commitments setting out (i) the outcomes it wants to achieve, (ii) how it will measure progress and (iii) how it intends to achieve the outcomes.

As previously announced, the FCA has committed to report against the strategic outcomes and metrics that it would set over a multi-year period. This business plan gives details of some of the proposed metrics to measure progress against the FCA commitments for 2022/23.

Focus 1 — Reducing and preventing serious harm

Focus 2 — Setting and testing higher standards

Focus 3 — Promoting competition and positive change

The FCA has set out detailed  metrics  to measure progress against the `topline outcomes' it is trying to achieve. Where metrics already exist, baseline values are provided. In cases where metrics are not yet available, the FCA has explained its plans for the future. The metrics will be further updated and developed through 2022/23.

The FCA has also reported on the seven strategic transformation-linked outcomes and metrics that formed part of last year's business plan.

Following on from the accountability theme, the FCA has published: for the first time, a paper designed to set out how it delivers public or societal value. This paper, designed to be a regular (presumably annual) publication, provides quantified estimates of the positive impact of a subset of its activities — specifically its policy interventions and enforcement work. The report includes value for money considerations which reflect the FCA's estimate that it has generated a benefit of at least £6 billion per year over the three-year period. This implies a benefit of at least £11 for every pound spent on running the FCA.

FCA increases in funding requirement

The FCA's annual budget reflects the cost of the resources it needs to carry out its proposed work in 2022/23. The key figure for firms is the Annual Funding Requirement which is the total amount that the FCA charges the financial services industry to fund its activities. The proposed funding requirement for 2022/23 is £640.1m — an increase of 4.3% on 2021/22.

Alongside the strategy and business plan, FCA has also published its annual  consultation  on regulatory fees and levies, which provides further information about its funding requirement and the impact on specific firm's activities. Alongside the funding requirement, the FCA is also proposing minor changes to its fees and levies policy including: 

• Changes to FCA periodic fees — including the new structure of minimum fees for the `A' fee-blocks and consumer credit firms.
• Integrating its new structure of application fees to credit rating agencies and trade repositories (including third country firms seeking certification as either).

Related Insights

Consumer duty.

Regulatory Insights

Michelle Adcock

Banking prudential and ESG, EMA FS Regulatory Insight Centre

KPMG in the UK

Kate Dawson

Wholesale Conduct & Capital Markets, EMA FS Regulatory Insight Centre

Philip Deeks

Retail Conduct, Regulatory Insight Centre

David Collington

Wealth and Asset Management, EMA FS Regulatory Insights Centre

• Financial Services

Summary of the FCA's 2022 to 2025 Strategy and Business Plan 2022/23

Summary of the fca's 2022 to 2025 strategy and business plan 2022/23.

The Financial Conduct Authority (“FCA”) published its strategy for 2022-2025 last Thursday, alongside its latest annual business plan for 2022/23. Whilst the publication of an annual business plan in April is typical (except for last year when it was published in July due to the ongoing Covid-19 pandemic), this year the FCA has also published an accompanying three-year strategy.

2022 to 2025 Strategy

The strategy document emphasises the directional shift that was introduced within the FCA’s 2021/22 Business Plan, which initiated a move away from detailed plans per financial service sector, to a focus on the outcomes the FCA is seeking across all the sectors it regulates. In the Chief Executive’s foreword to the strategy, Nikhil Rathi said “we are now focusing on results rather than being driven by processes”.

The FCA has defined four “consistent topline themes” that cut across both consumers and wholesale markets, which are:

• Fair value – ensuring consumers receive fair prices, quality and that markets sufficiently enable participants to make well informed assessments of value and risks
• Suitability and treatment – products and services sold to consumers are suitable for them and they received good treatment.
• Confidence – markets are resilient to firm failure, operate fairly and thus consumers have sufficient confidence to participate in these markets.
• Access – markets should be resilient, diverse and inclusive.

The FCA’s strategy also introduces three focus areas, those being: reducing and preventing serious harm; setting and testing higher standards; and promoting competition and positive change. These areas are covered in further detail within the 2022/23 Business Plan.

Also, for the first time the FCA has published performance measures such that its own performance can be monitored against the four key outcomes and its commitment to being a more innovative, assertive and adaptive regulator.

Business Plan 2022/23

The Business Plan sets out the regulator’s programme of work for the next 12 months to begin delivering on its three-year strategy.

Against a backdrop of recent and emerging macroeconomic and geopolitical challenges such as Covid-19, Russian invasion of Ukraine and further anticipated inflation increases, this is a challenging time for consumers and markets. There are also the strategic policy challenges of delivering a regulatory Brexit dividend, becoming a world thought leader on environmental, social and governance (“ESG”) matters and delivering on recently announced Government ambitions for the UK to become the world leading centre for fintech innovation, including cryptoassets. The rapid expansion of cryptoassets and digitalisation of financial services create both opportunities and risks. Against this complex and challenging agenda, the FCA is seeking to be better placed to continue to respond to such challenges and opportunities by focussing on outcomes across all sectors and markets. 

Following last year’s Business Plan, the categorisation and definitions of the FCA’s consumer priorities have changed, albeit the essence of the priorities defined in this year’s plan follow similar themes:

• “Ensuring consumer credit markets work well” and “making payments safe and accessible” are aligned to the FCA’s commitment in the 2022/23 plan of “putting consumers’ needs first”;
• “Delivering fair value in a digital age” is in line the commitment “shaping digital markets to achieve good outcomes” ; and
• “Enabling effective consumer investment decisions” is in line with the commitment of “enabling consumers to help themselves”.

The three commitments

1. Reducing and preventing serious harm

• The FCA has committed to “dealing with problem firms”, which will result in the removal of firms from the market if they don’t reach the regulator’s minimum standards
• Improving the redress framework so that it is fairer for consumers and firms from a global perspective
• Improving oversight of Appointed Representatives, following previous communication
• Reducing and preventing financial crime via a holistic, “whole system” response
• Being assertive in relation to detecting market abuse and taking decisive action.

2. Setting and testing higher standards

• Putting consumers’ needs first, starting with the progression of the proposed new Consumer Duty
• Enabling consumer self-service through ensuring promotions are clear, fair and not misleading
• Further developing the FCA’s ESG strategy, including developing a sustainability taxonomy and consulting on regulatory expectations relating to diversity and inclusion
• Minimising operational disruption through operational resilience expectations of firms

3. Promoting competition and positive change

• Future proofing the financial services sector by tailoring rules to benefit UK markets globally and thus strengthening the UK’s position in global markets
• Shaping digital markets to achieve good outcomes.

How the FCA will deliver on these commitments

Keeping with the FCA’s shift towards a focus on outcomes through cross-sector responses, its Business Plan includes common regulatory tools and activities to cross each of the three commitments, which are:

• Authorisation of firms and individuals
• Set rules and standards
• Support competition and innovation
• Empower consumers and firms
• Recognise and reduce harm
• Take quick and effective action.

The FCA has made it clear there needs to be significant investment in its own technology, infrastructure and data analysis to enable it to become a data led regulator. A number of the outcome measures depend on the FCA being able to deliver on its Transformation agenda. This is a significant investment. The last two years of reports and accounts show FCA spending to be on people at about 60% of spend and technology at about 13%. The Business Plan sets out a budgetary increase of 7.3% which is inflationary, changes to responsibilities and changes to national insurance contributions. The question is whether the ambition for transformation is matched by the budget.

What is on the horizon?

In our view, three key policy initiatives to watch out for from the FCA this year and future years are:

• Consumer duty - the FCA expects to publish the feedback statement and any finalised rules and guidance on the proposed Consumer Duty by July 2022 and expect firms to be working to implement these over the course of this year. It is important to point out that the Consumer Duty is not a rerun of Treating Customers Fairly. It is more fundamental and takes a new dimension in a digital world. The recent Discussion Papers by the CMA ‘Online Choice Architecture’ emphasises the importance of digital architecture in consumer protection and in driving effective competition, as well as highlighting some of the challenges.  
• ESG - ESG is a topic that is moving quickly and faster than the global regulatory thinking around it. The FCA published an ESG Strategy in November 2021, however there is still much to develop in this space and the FCA is engaged with industry and regulators nationally and internationally. For consumers, the focus is on minimising the risks of misleading advertising relating to ‘green’ products. For markets, the focus is on the quality and quantity of climate related sustainability disclosures. BDO publishes a Sustainable Reporting Update that may be of interest here .  
• Brexit – HMT will be expecting the FCA to utilise its regulatory powers to create a competitive advantage for London as a global financial centre, as well as the UK as a whole, whilst maintaining market cleanliness and standards.

If you have any questions or  would like to find out more, please contact  Richard Barnwell  or  Leigh Treacy .

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• The FCA's 2022 Strategy and Business Plan: outcomes-based, cross-sector regulation

Authors: Simon Treacy, Duncan Campbell

The FCA's 2022 Strategy and Business Plan: outcomes-based, cross-sector regulation

The FCA's latest three-year Strategy commits the FCA to three high-level focus areas: reducing and preventing serious harm; setting and testing higher standards; and promoting competition and positive change.

Its latest Business Plan describes the activities it plans for the coming year within each of these areas.

In this note we highlight key points from both documents.

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