The ability of the UK’s financial regulator to do its job is set to come under close scrutiny in a new probe.
The activities of the Financial Conduct Authority, which regulates a swathe of firms in the square mile from High Street Banks to crypto trading apps, are to be reviewed by the National Audit Office in a bid to “examine how the FCA is working with others, particularly HM Treasury.”
The NAO, an independent body which monitors the performance of government operations, said the FCA’s portfolio has swelled in light of new technological innovations like cryptoassets and artificial intelligence, while it also had to deal with a host of new regulatory regimes as well as comply with a statutory objective to “facilitate the international competitiveness” of the UK economy.
The FCA will be assessed on how it plans “take action to meet aspects of the challenges and take advantage of the opportunities posed by recent changes,” the NAO said.
It comes as the Standard revealed last week that regulatory approvals for fintech firms plunged to fresh lows in 2022 in signs London’s dominant fintech sector was being hammered by a draconian crackdown by the watchdog.
The approval rate of applications for Electronic Money Institution status, required for processing digital cash payments, fell to just 8% in 2022, figures obtained from FCA via a Freedom of Information request show, amounting to just 33 approvals. That compares to an approval rate of 90% in 2018 and a rate of 47% in 2021.
Industry insiders complained that poor staffing and retention levels at the regulator had exacerbated the fall in approvals.
Heather Adams, Head of UK Risk at Accenture, said: “The question many regulators globally are grappling with is how to balance a safe and stable financial system and retail consumer needs, with financial innovation and broad protection from harms.
“Concerns around resourcing and talent retention remain recognisable today; the breadth of mandate and objectives, and the capacity to meet them, will likely be an area of focus.”
