The FCA has set out its priorities for regulating the UK financial services sector in two recent publications:
- Strategy for 2025-2030 (Strategy)
- Annual work programme for 2025-26 (Work Programme)
We highlight below the main aspects of the Strategy and Work Programme, and some important considerations for firms.
Strategy
The Strategy confirms the FCA's four high-level priorities for the next five years:
- Being a smarter regulator (smarter regulator priority)
- Supporting growth (growth priority)
- Helping consumers navigate their financial lives (consumer priority)
- Fighting financial crime (financial crime priority)
The FCA believes that a smaller number of priorities will enable it to have more impact. Shortly before publication of the Strategy, Nikhil Rathi, FCA Chief Executive, acknowledged at an insurance industry roundtable event that the FCA recognised concerns about the pace of regulatory change and would aim for fewer large-scale changes under its Strategy1.
The four priorities are interdependent and mutually reinforcing. They reflect familiar and current themes referenced by the FCA. They are also reinforced by the FCA's vision of deepened trust and rebalanced risks, to support growth and improve lives.
Deepened trust
The FCA considers that deepening trust - both in the sense of trust in the industry and trust in the regulator - is a crucial element in pursuing growth, together with the other elements of ensuring proportionate regulation and encouraging innovation. The smarter regulator priority is central to how the FCA can achieve this deepened trust. In the language of the Strategy, it will seek to be "efficient and effective" and "predictable, purposeful and proportionate". To deepen trust in financial services, the FCA's rules must be fair and allow for open competition, regulatory returns and data requests must be reviewed and reduced (wherever possible), and those that act in breach of the regime must be dealt with promptly and held accountable.
As a regulator, the FCA will continue to be outcomes-focused and data-driven. In its quest to become "smarter", it will further reform how it regulates, with a greater focus on data and digital tools. This includes supervision, where, among other things, the FCA intends to streamline how it sets its priorities, provide less intensive supervision to firms "demonstrably seeking to do the right thing" and share more insights from its supervisory work. In terms of enforcement, the FCA's focus will mean a smaller portfolio of cases, with the same number of outcomes, but delivered assertively and at a quicker pace, to achieve impactful deterrence.
Rebalanced risks
The FCA accepts that the balance of risk must be adjusted to enable stakeholders to lean into growth. It comments: "Too often the focus has been on the risks of a decision taken rather than the lost opportunity of taking none." It has identified three different types of risk: regulatory risk, market and firm risk, and consumer risk. The FCA encourages an open debate, with industry and with the Government, both on these risks and on the trade-offs that come with any rebalancing exercise, such as potentially higher volumes of failure or harm. The FCA's view is that "regulation should be about enabling informed risk to be taken, not eliminating it altogether" and that the focus must be on "risks that regulation should allow in context of our current environment, rather than that of the past".
But what, in practice, is an acceptable ratio of risks to trade-offs? The FCA recognises that it will not stop all harm when making risk-based choices about the cases and intelligence it pursues, and that, increasingly, it deploys technology to make choices with speed and at scale2. Nikhil Rathi has suggested the development of "metrics for tolerable failures within the overall system" and called for a broad consensus on what the appropriate risk appetite should be and how trade-offs should be balanced3. However, as neither the Government nor Parliament is likely to want to get into specifics about what is an acceptable level of risk, the FCA will have to set a course between delivering on its secondary objective to support growth and its primary objectives of promoting consumer protection, financial market integrity and effective competition. This will not be an easy task in the current climate.
The FCA has developed a set of outcomes and metrics relating to the four priorities against which it can be held accountable. It aims to achieve the outcomes for consumers, the markets and the wider economy. Many require it to work collaboratively with the Government, counterparts and/or industry to maximise impact. This echoes the emphasis in the Strategy on the importance of partnerships and strong bilateral relationships.
Accompanying the outcomes are the key metrics on which the FCA will focus to track progress. As with the outcomes, the FCA recognises that other factors (notably wider economic and geopolitical conditions) will influence how its metrics change. On an annual basis, it will provide an update on the outcomes and metrics, presenting the latest data to demonstrate progress.
Work Programme
The Work Programme sets out what the FCA will deliver over the current financial year in relation to each of its four priorities. The themes of the Work Programme reflect the FCA's vision, while the content of the Work Programme details how the FCA will deliver in 2025-26 on its strategic priorities.
In addition to summarising its previously announced and ongoing work, the FCA sets out new work and initiatives. These include the following, many of which were foreshadowed in the Strategy:
- Reform how the FCA regulates and supervises
(this relates to the smarter regulator priority). There are a
number of actions and initiatives in this regard, but of particular
interest are the FCA's intention to:
- be transparent about the risks and opportunities it sees in the markets, to make its actions easier to understand and predict; and
- review its firm categorisation model to seek to build relationships with a wider range of participants that it considers have the most significant impact and influence within their markets. It describes these participants as "the firms we want to maintain specific contact with, so we can engage with them directly on market risk or opportunity". This may include engagement with trade associations and other influential stakeholders.
- Improved use of intelligence and data to identify and act on harm (this relates to the smarter regulator priority). The FCA will change and simplify its processes to focus its efforts on higher risk cases, including through automation and new technologies, and an expanded use of data and intelligence to better support the FCA's Supervision and Authorisation teams.
- Accelerate digital innovation to improve productivity (this relates to the growth priority). There are various new initiatives, including working with firms to support the adoption of AI and machine learning use cases (for example, through testing in the AI Lab).
- Reduce the regulatory burden (this relates to the growth priority). With the Consumer Duty in place, the FCA will take steps to amend or simplify certain rules, guidance materials and wider communications, as summarised in FS25/2. Allied to this, the FCA will ensure that its future consumer protection work first considers the Consumer Duty and whether it is sufficient, rather than requiring new rules.
- Make it easier for financial services firms to start up and grow, delivering more innovative and productive financial services (this relates to the growth priority and the smarter regulator priority). The FCA will support more early and high growth firms, with an increase in dedicated supervisors. It will provide a dedicated authorisations case officer to every firm in the regulatory sandbox and extend its Pre-application Support Service (PASS) to all wholesale, payments and crypto firms. The FCA will digitise and further improve the authorisations process and indicate more frequently that it is "minded to approve" promising start-up firms, to help them secure funding.
- Improve UK exports and inward investment (this relates to the growth priority). In the Strategy, the FCA describes itself as "an international regulator for an international market". It will work in partnership with the Government, the City of London Corporation, the PRA and others to create an effective system that promotes the UK as a place to do business, assisting both firms seeking authorisation and firms exporting services. The FCA will also continue to support the Government's strategy to establish the UK as a global sustainable finance hub. However, it acknowledges there could be hard choices if standards set globally through agreements and multilateral bodies are not comprehensively implemented across jurisdictions.
- Continue to embed and use the Consumer Duty for consumer protection work (this relates to the consumer priority). The FCA will share further good and poor practice examples, including in areas such as outcomes monitoring, fair value and consumer understanding, as well as the application of FCA requirements through the distribution chain.
- Fight financial crime (this relates to the financial crime priority). The two new initiatives announced in the Work Programme relate to identifying financial crime and tackling organised crime. The FCA will build a new data-led detection capability to bring together multiple data sets. It also intends to make it harder for serious organised crime to access regulated financial services to launder money and commit crime. In addition, it will take forward its focus on proactive assessments of anti-money laundering (AML) systems and controls for the firms it regards as higher risk.
Pulling the publications together
In conclusion, what message about the intended direction of the FCA over the next five years can the financial services industry take from the Strategy, Work Programme and FS25/2?
The Government's growth mission means the FCA's secondary competition and growth objective can be said to have assumed greater significance. The many references across recent FCA publications to encouraging competition and innovation, reforming how it regulates, simplifying its rules and reducing the regulatory burden, indicate the principal ways in which the FCA intends to achieve this over the coming years.
Nevertheless, the continued centrality of the Consumer Duty and outcomes-based regulation, together with the focus on financial crime as one of the Strategy's four priorities, shows the FCA is no less emphatic about its primary objectives of consumer protection, financial market integrity and effective competition in the interests of consumers.
The FCA inevitably has to strike a balance between priorities that are in many respects complementary, but, in other respects, are contending with one another.
Footnotes
1. Speech by Nikhil Rathi: "The Gordian knot of growth" (27 February 2025).
2. Letter from Nikhil Rathi to the Prime Minister and HM Treasury: "RE: A new approach to ensure regulators and regulations support growth" (16 January 2025).
3. Transcript of oral evidence to the House of Commons Treasury Committee on the work of the FCA (HC 417) (25 March 2025).
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