FCA speaks on “rolling regulation forwards”

Nikhil Rathi spoke to UK Finance on three key developments which he said will drive regulation forwards:

• the Consumer Duty: he discussed FCA’s reasons for introducing the Duty, and how FCA would be looking to measure the impact. One measurable target will be reducing the number of complaints that go to FOS. He said that FCA’s hope is that the Duty will result in fewer reactive rules in future, and that FCA welcomes suggestions from the industry on how it can further simplify its rulebook;
• innovation and the use of AI: he noted the mistrust of AI in some areas, discussing the existence of an AI took which was 99% accurate in predicting a customer’s bank balance in a year’s time, but which customers did not want integrated into their banking app. He said that the Consumer Duty and the SMCR will give FCA the framework to respond quickly to this sort of innovation so it can be trialled with consumer interests “front and centre”. He also said the Duty will help FCA to manage the entry of BigTech firms into the UK markets. But ultimately, he said there must be acceptance that responsibility for AI stops with the human leaders of firms; and
• financial inclusion: FCA is aware of the argument that the introduction of the Consumer Duty may prompt risk aversion in firms, and said FCA will be working to ensure vulnerable customers are not disadvantaged.  FCA acknowledges that technological developments risks leaving some consumers behind and noted the commitment to retaining access to cash and said FCA is encouraging the accelerated development of banking hubs and alternative forms of banking service provision.