FCA business plan

Executive Summary

The FCA recently issued its business plan for 2021/22 (the Plan) which is characterised by a more assertive and proactive approach underpinned by a move to be more focused on principles and outcomes than rules and processes. 

This is of particular relevance to treasurers as, even if they are not employees of regulated firms, the actions of the FCA feed through to them through the changes in behaviour that they drive in the regulated companies.

By way of background, the regulator considers the following challenges are shaping financial services:

  • the rise in vulnerability of FinTechs and other small businesses coming out of the pandemic
  • rapid technological change
  • rewriting the UK regulatory framework after Brexit 
  • transition to a net-zero economy. 

In response the Plan aims to transform how the FCA works and regulates by being more:

  • Innovative – taking advantage of data and technology to increase its ability to act decisively and proactively in the interests of consumers
  • Assertive – testing the limits of its powers (even if it knows it may not win a case)
  • Adaptive – constantly learning and adjusting its approach as consumer choices, markets, services and products evolve.

The Plan sets out priorities for consumer markets, wholesale markets and cross-market issues, alongside plans for a new accountability framework, containing specific outcomes and metrics for measuring the FCA's progress.

The Plan in greater detail


The FCA will continue its focus on the four strategic priorities from last year’s Business Plan recognising that some of these may have changed to reflect changes in consumers’ finances and behaviour. It has also added a fifth - Consumer Duty which is “raising of the bar” in the treatment of customers. 

1.    Enabling consumers to make effective financial decisions

The FCA has extended this from just investment consumers to all consumers. 

The FCA has made some progress, such as in looking to strengthen financial promotion rules and awareness of ScamSmart

The FCA’s next near-term priorities are:  

  • Publishing a Consumer Investments Strategy (which will include how the FCA tackles firms and individuals who cause consumer harm) and a second data report, detailing the FCA’s work to protect consumers
  • Creating a “consumer investment coordination group” with the FSCS, the FOS and the Money and Pension Service (MaPS), to gather information on sharp practices and so better target interventions
  • Starting a review of some of the rules on the scope and coverage of FSCS compensation.

2.    Ensuring consumer credit markets work well

The FCA will focus on:

  • How firms are providing tailored support to borrowers in financial difficulty
  • Reviewing its approach to the debt advice rules to help over-indebted consumers get high-quality advice
  • Bringing “Deferred Payment Credit” into its regulatory remit
  • Considering possible future changes in credit information markets where consumers can choose to use credit information to make better-informed decisions.

3.    Making payments safe and accessible

The FCA is placing greater emphasis on consumer protection by ensuring access to payments services and the payments market being competitive and innovative – especially for smaller businesses. It will:

  • Focus supervisory activity on ensuring payment services and e-money firms are financially robust and customers understand FCSC coverage 
  • Seek to continue to protect access to cash – particularly for consumers in vulnerable circumstances
  • Work with HMT to develop policy and recommendations on payments, e-money and crypto-assets.

4.    Delivering fair value in a digital age 

The FCA will build its digital markets strategy by developing a framework to identify and assess potential harms and benefits arising from the increasing digitalisation of financial services markets. The FCA will focus on:

  • Assessing the implementation of the GI pricing practices requirements (January 2022) by using firms’ reporting data to measure success, track market changes and identify firms that continue to engage in price walking (when new insurance customers receive more competitive and cheaper premiums compared to long-standing customers renewing their cover)
  • Continuing to assess the impact that digitalisation can have on competition to help ensure that digital financial services markets operate effectively to generate good customer outcome
  • Investigating activities, such as “sludge practices”, which make it difficult for consumers to cancel a product or service online.

5.    Consumer Duty

This is a new priority driven from the FCA’s recent consultation on a New Consumer Duty, which signals a “paradigm shift in its expectations” of firms especially given the increase in the number of vulnerable people in society as a result of the pandemic. The expected outcomes are that:

  • Communications enable consumers to make effective, timely and properly informed decisions
  • Products and services are specifically designed to meet consumers’ needs and sold to those whose needs they meet
  • Customer service meets the needs of consumers, enabling them to get the benefits of products and services and act in their interests without unnecessary barriers
  • The price of products and services represents fair value for consumers.

Wholesale markets

The FCA’s focus is widening from market integrity to include effectiveness and efficiency. It notes the rising “gamification” of finance given the digital access consumers now have to wholesale markets. As retail consumers do not have the same protections when accessing wholesale markets directly, the regulator considers it is important that wholesale firms meet conduct obligations around conflicts of interest, price manipulation and information. 

1.    Review of rules in primary and secondary markets

The FCA is consulting on amendments to the Listing rules, including recommendations for the Lord Hill’s UK Listing Review Report, and the proposed rules around special purpose acquisition vehicles (SPACs). The FCA is proposing to extend climate-related financial disclosures from premium listed companies to standard listed companies. In the secondary markets, the FCA is working with HM Treasury to simplify and improve the effectiveness of the on-shored MiFID II/ MIFIR regimes. 

2.    LIBOR Transition

Firms and markets complete an orderly transition away from LIBOR to alternative risk-free rates, with customers treated fairly throughout this transition.
With the cessation of non-USD LIBOR at end-2021, the FCA will focus on using its powers to support an orderly transition (i.e. finalising the framework around the use of synthetic LIBOR). Regulated firms should expect increased monitoring of their transition plans by both the FCA and the PRA. 

3.    Market abuse and financial crime

No new initiatives are announced, but the FCA will seek to measure its impact in this area.

4.    Asset management and non-bank finance

The FCA will continue to focus on how asset managers ensure value for consumers, increase its supervisory focus on whether disclosures on ESG properties of funds are fair, clear and not misleading, and continue to seek to identify funds that are outliers to their peers (e.g. due to high fees). It will follow up the findings in its June report on governance weaknesses in host Authorised Fund Managers and its work with the Bank of England on liquidity management in open-ended funds and reform of money market funds. It will introduce the new “LTAF” structure, designed to accommodate relatively illiquid assets, and will decide whether to proceed with requirements for notice periods for open-ended property funds.

5.    Pension products

The FCA will be working with the Pensions Regulator (TPR) on reviewing how to best drive value for money in pensions by ensuring pension providers offer good value products and consumers are able to make effective choices. The FCA will also be consulting on changes for non-workplace pension providers to help ensure consumers are offered an appropriate default solution where they need it.

6.    Appointed Representatives regime

The FCA is concerned that the oversight of principal firms (which have regulatory permissions) over their appointed representatives (ARs) is not strong enough and leading to unfair outcomes for consumers. The FCA will increase its supervision in this area and consult on cross-sector changes to improve and strengthen elements of the AR regime –which may include new legislation.

Cross-market priorities

The seven priorities in the Business Plan that are across all markets are not exhaustive and the Regulatory Initiatives Grid carries more information.

1.    Fraud

The FCA’s focus will be on:

  • Keeping fraudsters out of financial services at the gateway
  • Stopping regulated firms from facilitating fraud
  • Detecting and pursuing FCA-supervised and improperly unauthorised/ unapproved fraudsters
  • Informing and empowering the public to protect themselves.

It will conduct proactive surveillance and monitoring, use effective triage to prioritise, disrupt the work of fraudsters and identify the right intervention, remove FCA-supervised fraudsters from the financial system, and work closely with anti-fraud partners to coordinate the fight against fraud. 

2.    Financial resilience and resolution

Firms to:

  • Have appropriate capital, liquidity and reserves to cover outstanding redress liabilities, so they do not fail in a disorderly manner
  • Hold financial resources proportionate to the potential harm caused if they do fail, reducing the level of FSCS pay-outs over time.

3.    Operational resilience

Firms should be operationally resilient against multiple forms of disruption to minimise the harm caused to consumers and markets. From April 2022, the FCA will assess the capability of firms to remain within their impact tolerances.

4.    Diversity and inclusion

The FCA wants to improve its own diversity and encourage firms to:

  • Have more diverse representation at all levels
  • Foster cultures that are inclusive so that staff can share their diverse experiences and backgrounds
  • Design and deliver products that reflect the diverse needs of consumers, offer fair value and are delivered in a fair and accessible way
  • and to see better data collection to help it measure progress against these outcomes.

5.    Environment, social and governance (ESG)

The FCA will:

  • Encourage the generation of high-quality climate- and sustainability-related disclosures to help consumers identify sustainable investments and drive fair value and promote the growth of providers of ESG data, ratings, assurance and verification service
  • Support innovation in sustainable finance, making use of technology where appropriate
  • Continue work on TCFD-aligned disclosures for listed companies and asset managers/ owners
  • Work to address concerns about greenwashing
  • Promote standardisation of wider ESG-related disclosures
  • Monitor the exercise of investor stewardship by institutional investors
  • Encourage innovation in sustainable finance
  • Enhance its role as a facilitator of sustainability in financial markets and firms by acting as a convener, agent of change and role model.

6.    International

The FCA says it will be an active member of international standard-setting bodies, participate in the IMF’s 2021 review of the UK, ensure smooth operation of the Temporary Permission Regime and engage with firms to ensure orderly exits from Brexit transitional arrangements.

7.    Market access, equivalence and trade negotiations

The FCA aims to:

  • Create future trade relationships that support open markets in a way that respects and promotes the UK’s objectives and ensures regulatory and supervisory autonomy
  • Support a domestic market access regime that addresses regulatory and supervisory risks from cross-border access, operates effectively post EU-withdrawal and recognises the benefits of open markets.

New authorisations

In his speech accompanying the launch of the Business Plan, the CEO noted that the FCA’s assertiveness will include the approach to authorisations and new business.
New authorisations staff have been recruited with plans for a greater focus on examining applicants’ financials and business models. The regulator will apply more scrutiny when a business is seeking authorisation in a complex area or for high-risk businesses (such as crypto asset firms). This will extend not only to new firms, but also to those within the temporary permissions regime that are seeking permanent UK authorisation. These firms will be subject to a more intensive assessment before being granted authorisation and this may lead to some contentious outcomes.
The FCA has also set itself specific metrics relating to refusal, withdrawal, and rejection rates for authorisations, and for increasing the number of firms whose permissions are removed either permanently or temporarily under its “use it or lose it” campaign.
It plans to scrutinise more closely newly authorised firms undertaking novel types of business, creating a “Regulatory Nursery” to check that such firms are complying with the rules and identify potential harm early. The FCA also intends to increase oversight of firms with significant and fast-paced growth.

What this means for Treasurers

The FCA is setting a higher bar for authorisation of new businesses. This will provide more protection for consumers and businesses but will slow down and potentially restrict new entrants. Most treasurers are risk-averse and this greater due diligence by the FCA should provide them and their boards with more confidence over their use of FinTech businesses.

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