The Financial Conduct Authority will require 20,000 regulated companies to begin reporting on their financial resilience as part of its plan to minimise harm to customers.
In its business plan for 2023/24, published today (April 5), the regulator said in the next year it will introduce a new “regulatory return” requiring solo-regulated financial services firms to provide a base level of information about their financial resilience.
The FCA said while all firms will always carry a risk of failing, it would be inconsistent with its new secondary objective (to promote competitiveness in the sector) to seek to operate a “zero-failure” regime.
“Firms with weak financial resilience are more likely to fail,” the FCA said.
“Our job is to minimise the harm and loss to customers and markets when they do.”
The FCA said it wanted to ensure firms are meeting their financial resource requirements so that they can conduct business, wind down, and even fail without causing harm to consumers and other market participants.
It also wants to be able to identify firms at risk of failure, and ensure the companies are able to rectify their weaknesses, wind down solvently or enter insolvency in a way that minimises harm to consumers and the wider market.
Nikhil Rathi, chief executive of the FCA, said: “We set out a bold vision last year of what we wanted the FCA to be, and we are well underway to achieving our objectives thanks to our talented colleagues and the better use of technology and data across our organisation.
“With many consumers across the UK struggling with the cost of living and markets events causing concern, we have put in place vital changes over the past few years which mean we’re better set up to face these challenges.”
Elsewhere, the FCA said it will expand its efforts in tackling scams.
The regulator already runs a ‘ScamSmart’ consumer campaign across loan-fee, investment and pension fraud.
In the coming year, the FCA will expand its ability to gather evidence and analytics to spot and track potentially fraudulent activity.
“[We aim to] reduce the average amount of money lost due to scams.”
It will also develop its ability to search social media platforms to allow it to better identify illegal financial promotions faster and in larger volumes, as well as working with “fin-fluencers” (popular social media accounts who give financial information, tips and recommendations) to educate them about their regulatory obligations.
Debbie Barton, financial crime prevention expert at Quilter, said it was “pleasing” to see the FCA set out how it will improve its ability to curtail scams
“However, the FCA can only do so much,” she said.
“The government has been reliant for too long on financial businesses spotting scams to help protect consumers, however, when they do it is often after the scam has taken place, and thus incredibly difficult to recover the funds stolen.”
“Ultimately, tech firms have a duty of care and need to be doing more from the outset to stop these scams popping up in the first place.”
Data released by the FCA shows the number of warnings issues about potential scams rose a third to 1,882 in 2022.
In the last year, 23 per cent of firms applying to operate in the UK were not authorised.