The Financial Conduct Authority (FCA) has continued to streamline regulation as it takes aim at what qualifies as regulatory capital.
The proposed change will affect the types of funds investment firms must hold to absorb losses and maintain financial resilience during periods of stress. However, it is important to note that this will not change the requirements regarding the amount of capital firms must hold.
Simon Walls, Interim Executive Director of Markets, said: “We are always trying to be a smarter regulator, and part of that agenda is reducing unnecessary burdens on firms. The aim here is to make the rules around how firms hold their capital simpler for the vast majority of firms.”
The FCA has explained that the current rules were designed for banks, describing them as “complex and not tailored to investment firms’ business models.”
The changes being proposed by the financial watchdog would reduce the volume of text by 70%, as it believes these sections are irrelevant for most firms. Additionally, it has also shared intentions to simplify other sections.
Walls added: “We want the revised framework to be proportionate, effective, and aligned with the needs of investment firms while maintaining high standards of financial resilience and consumer protection.”
Keeping its promise
In recent months, the FCA has implemented significant changes to its regulatory approach. These changes are in line with Prime Minister Keir Starmer’s efforts to encourage financial growth and investment across the UK
The FCA’s recent actions include launching a process to remove the £100 contactless payment limit, assigning dedicated case officers to every firm in the regulatory sandbox, and issuing more “minded to approve” notices to help early-stage firms secure investment.
Most recently, the FCA also proposed removing three specific data collections from its handbook.
Walls concluded: “Our proposals support the ambitions that we have set in our new strategy and in the commitments we made to the Prime Minister to streamline regulation and reduce regulatory burden while supporting the growth and competitiveness of the UK.”
