FCA commits to “earlier, faster, targeted” intervention

The Financial Conduct Authority (FCA) is seeking to emulate the ‘Toyota Way’ of operating, embracing the Japanese philosophy of kaizen in an approach which will include self-criticism, challenging the status quo, and taking a more efficient approach for better outcomes, according to Therese Chambers, joint executive director of enforcement and market oversight.

Speaking at the AFME Annual European Compliance and Legal Conference, Chambers said the regulator is looking to intervene earlier, acting faster and with more focus, and is taking a “targeted, outcomes-based approach… not shying away from tough conversations in pursuit of long-term success.”

As part of this new approach the FCA – which has recently announced a six-month extension to the deadline for its review of discretionary commission arrangements in the motor finance market – says it wants to speed up enforcement investigations.

Currently, investigations closed in 2023/24 took an average of 42 months to complete, but Chambers said the regulator has made “significant advances”, with 24 outcomes under its belt so far for 2024, compared to 26 for the whole of 2023.

Chambers told conference delegates: “I am encouraged by these green shoots and we are committed to conducting our investigations at greater pace. Hand in hand with increasing our pace, will be streamlining our caseload and focusing on investigations better aligned to our strategic priorities.

“But let me be clear: a reduction in the number of investigations does not mean a reduction in effort. Quite the opposite. It’s about making a conscious decision to identify cases where we believe there may be conduct creating the greatest risk of harm, and where an investigation is most likely to drive the greatest deterrence. Neither does it mean going for the low hanging fruit.”

Going forward, Chambers said “whilst we may be opening fewer investigations, we expect to see a greater number of outcomes and a greater impact from our enforcement activity.”

“Name and shame” rejected

However, Chambers had to concede that the FCA is rowing back on a proposal made earlier this year to “name and shame” firms under investigation while enquiries are still ongoing, which would align its position with that of other UK regulators such as the Financial Reporting Council.

While the measure was intended to increase transparency, it met with strong criticism from firms concerned about reputational damage and the ability to defend their actions.

Addressing this, Chambers said the proposals had never been intended to suggest a sudden switch to a blanket “computer says yes” approach.

“We are not proposing moving from publicity in zero cases now, to 100% of cases in the future. Rather, a case-by-case approach following assessment of clearly defined criteria – including consideration of the potential impact on the firm and market. But we heard loud and clear that the criteria we consulted on were too high level and lacked specificity.

“This autumn, we will intensify our engagement – meeting with trade associations, firms, those on all sides of the debate – exploring how we can develop our proposals. As part of this, we recognise the desire for greater definition on any new public interest test,” she explained

In conclusion, Chambers said that going forward, the FCA will be concentrating on a “focused number of cases likely to deliver the greatest deterrent, and delivered much faster.”

“We are committed to achieving this in the right way for UK consumers and markets, so we won’t be rushing into any decisions. We want the right solutions, not the quickest ones. And rest assured, as we work to find those solutions, we will be mindful of all our objectives – including supporting the international competitiveness of the UK’s financial services and the medium to long term growth of the economy,” she pledged.

Edward Peck, Asset Finance Connect CEO, said: “Faster and more clearly targeted interventions from the FCA are to be welcomed.

“Recent AFC research on the market impact of the regulator’s current motor finance review confirms lenders are holding back from investment because of the ongoing uncertainty around regulation in the sector.

“Delaying the decision leaves firms bracing themselves for increased complaints and potential redress schemes. The need for continued contingency -when there may be no case to answer – is reducing the capacity for the industry to play its vital role in enabling the transition from ICE to battery. There is a clear opportunity for the new Government to intervene here to make the regulation work properly for the good of consumers and industry.

“The next AFC conference in November will focus on the likely impact of the new Government on the auto, equipment and asset finance industries and we will be exploring this issue in more depth then.”

Find out more about AFC’s November conference here.