Andrew Bailey has clarified the UK regulator’s position on financial services innovation and Brexit.
Huge challenges are facing financial services aside from Brexit uncertainty, according to chief executive of the Financial Conduct Authority Andrew Bailey.
He says these include long-term saving and retirement provision as well as adjusting to the fintech disruption and the increasing pace of this innovation.
Speaking at the Investment Association’s annual dinner earlier this week at Mansion House, Bailey revealed an optimistic outlook for financial services in general and the UK in particular owing to fintech innovation but also stated the need for openness.
For the UK to meet these challenges, sentiment must be very well anchored to the principles of open markets, strong competition and a willingness to embrace change, Bailey said.
“Brexit is, of course, a challenge. But it is important that we are very robust in supporting what works today, and in doing so rejecting the case that Brexit must mean a weaker European investment management sector because there is a failure of the imagination required to preserve and develop what works today.“ he said,
The UK has around a one-third share of EU assets under management. It is the largest market in Europe with around £8trn of assets, representing more than the next three countries combined. Investment managers in the UK manage just over £1 trn on behalf of overseas-authorised funds. Cleary this is a key focus for the on-going Brexit negotiations.
“Over 80 per cent of those funds are domiciled in either Luxembourg or Dublin. This requires co-operative arrangements which are well established. Let’s not beat about the bush, this model works – it works well for investors and for investment managers. So, why disrupt it, or put another way, must it be disrupted?,” Bailey said.
Nonetheless the UK regulator, the FCA, has been something of a leading light for fintech. Since 2014 it has developed Project Innovate which has helped start-ups as well established businesses produce innovative financial services and products as well as an Advice Unit, which provides feedback to firms; and its Sandbox, a “safe place” where firms can test innovative products.
Alongside these initiatives, in 2016 it introduced with the PRA a New Banks Start-up Unit which is designed to assist new banks to get going, including through the authorisation process.
“We thought we would take another step, and so recently we have announced another initiative, to create a start-up unit for new investment managers.
We want a dynamic, vibrant sector with an engaged customer base and firms competing effectively to deliver value for their customers, “ Bailey adds.
“A key feature of vibrant, competitive markets is ease of entry for new participants. In the regulated space, that means ensuring the regulator strikes the right balance between ensuring only fit and proper firms are able to conduct regulated business with ensuring that barriers to entry do not deter well-governed, innovative firms. “
He says the FCA can do more here.
“This is not about reducing regulation; it is about promoting a vibrant, well-functioning industry that helps to provide for the critical long-term savings.”
With fintech and finance more broadly a key current issue for the UK amid Brexit, other long term challenges such as the pensions gap and stubbornly productivity can’t be forgotten.