The FCA chief executive Nikhil Rathi has signalled a willingness to pivot from risk aversion to better support growth and innovation in financial services.
“Five years ago, a central theme was that we were too legally risk averse. Not curious, assertive or joined up enough,” Rathi told delegates at TheCityUK’s annual conference on Thursday (26 June).
“We have since made big changes: the Consumer Duty, stepping up the fight against financial crime, and taking several groundbreaking legal actions.”
He added that these reforms helped reduce the industry compensation levy to a ten‑year low, easing cost pressures for firms.
Despite earlier efforts to sharpen the regulator’s edge, Rathi pointed out a new critique emerging that excessive compliance burdens and cautious regulation may now be inhibiting growth.
“The chancellor sees the regulatory system as having regulated for risk, not growth,” he said.
To address this, Rathi said the FCA is engaging in an “open debate on risk appetite” and exploring metrics for tolerable failure alongside those for competitiveness, growth and operational performance.
He questioned whether longstanding measures such as the Mortgage Charter—designed for an era of rising interest rates—are still required.
“With the Duty in place, repossessions low and a maturing risk mindset, do we need this duplicative approach with the added reporting burdens it brings?” he asked, urging reflection on political risk if such policies remain in place.
He also indicated that the FCA is open to clarifying client classifications to differentiate regulation between wholesale and retail markets, though some changes may require new legislation.
Data collection emerged as another priority area to build trust with firms. Rathi outlined plans to take a “more proportionate approach” by either retiring or significantly reducing regulatory data demands.
“Three regular data collections already switched off, benefitting an estimated 16,000 firms,” he noted, adding that a consultation launching this summer will look at further reductions.
He stressed the importance of enhancing data collection in key market areas, such as gilt markets, where hedge funds now account for about 27% of weekly liquidity.
“When [volatile market events] happen, we need to be ready,” he said.
He also called for improved data sharing internationally and across over‑the‑counter markets – in part to protect the integrity of the UK’s relatively smaller, more exposed sovereign debt market.
Rathi concluded that the FCA is committed to promoting “a different kind of confidence. Built on strong evidence and timely data.”
He warned this is not over‑regulation, but essential regulation tailored to the UK’s context.
