UK Parliament’s House of Lords Financial Services Regulation Committee published a report on progress in embedding the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) secondary international competitiveness and growth objective introduced by the Financial Services and Markets Act 2023, concluding it is being held back by pervasive risk aversion, regulatory uncertainty and inefficiency. The Committee argues these factors create unnecessary friction for firms’ ability to grow, innovate and compete and deter new entrants. The report highlights a perceived disproportionate compliance burden and says the regulators lack a clear understanding of the cumulative cost of regulation, pointing to shortcomings on proportionality including the FCA’s approach to wholesale versus retail markets and the PRA’s approach to capital requirements. It also flags uncertainty over Consumer Duty interpretation and the interaction between FCA rules and the Financial Ombudsman Service (FOS) decision-making as potentially reducing the UK’s attractiveness for investment, and identifies the PRA’s approach to setting capital requirements as limiting incentives and capital availability to finance growth. Recommendations include cultural and operational change within the regulators, creation of a joint cost of compliance working group linked to their Cost Benefit Analysis Panels, clearer Consumer Duty guidance and a clearer approach to long-standing redress concerns involving the FCA and FOS, and prioritisation of the Advice Guidance Boundary Review; the Committee also urges the Government to reduce regulatory overlap, set clearer growth-related parameters for the regulators, develop outcomes-based secondary objective metrics, commission an independent study on cumulative compliance costs versus other jurisdictions, and take steps to improve financial education.
UK Parliament 2025-06-13
UK Parliament committee urges FCA and PRA culture change and clearer Consumer Duty approach to deliver competitiveness and growth objective
The UK Parliament’s House of Lords Financial Services Regulation Committee report criticizes the slow progress in embedding the FCA and PRA secondary international competitiveness and growth objective due to risk aversion, regulatory uncertainty, and inefficiency. It highlights disproportionate compliance burdens, unclear Consumer Duty interpretation, and the PRA’s capital requirements as barriers to growth. Recommendations include cultural and operational changes within regulators, clearer guidance, and reducing regulatory overlap to enhance the UK's financial sector competitiveness.