A new industry-backed report [1] from TheCityUK finds that financial regulatory authorisations at the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) can be slow, inefficient and unpredictable. When they are, they undermine firms’ confidence in the regulators’ operational efficiency, create additional operating costs, and raise concerns about the long-term impact on UK competitiveness.
The report, ‘Improving regulatory efficiency on authorisations’, makes clear that whilst regulators continue to be a UK strength, where firms perceive their authorisations processes as too complex, opaque, or slow, it can discourage further growth and investment.
Financial services firms are required to seek authorisation from regulators for a range of permissions to conduct business in the UK, be it varying the categories of products and services they offer, to appointing individuals to senior management or other controlled functions. Authorisations are therefore a vital component of the continuous oversight of regulated financial services firms and individuals.
While recognising and welcoming that both the FCA and PRA are already taking forward measures to improve their authorisations processes and reduce backlogs, the report sets out a series of recommendations for further action that, if delivered in conjunction with those measures already in train, would improve their speed, efficiency and effectiveness.
TheCityUK’s research involved in-depth interviews with over 20 industry leaders and a survey of 40 firms about their experience of four specific areas of the UK regulation authorisation processes (firm authorisations (Part 4A), variation of permission, change in control and approval of senior managers). The report finds that the majority of respondents (83%) found that the inefficiencies of these authorisations are slowly damaging the international competitiveness of the UK.
Miles Celic, Chief Executive Officer, TheCityUK, said, “The UK is one of the world’s leading international financial centres, but our competitors are biting at our heels. Complacency is not an option. The Financial Services and Markets Bill and measures set out in the Edinburgh reforms provide a strong platform from which the UK can continue to strengthen our position. However, the culture and operational efficiency of regulators are critical factors in maintaining the UK’s competitive edge. Successfully updating the rules also depends on the referee implementing them in the same spirit and with the same energy.
“While the UK’s regulatory framework and high standards underpin our attractiveness as a place to invest and grow, it is clear that an efficiency gear shift in regulatory culture would help to strengthen that position. More efficient, transparent, and timely authorisations processes are an important part of that and would help enhance the country’s competitive advantage.”
Omar Ali, Chair, TheCityUK Long-Term Competitiveness Group and EMEIA Financial Services Managing Partner, EY, said, “The competitiveness of an international financial centre is driven by a range of factors. The UK’s strengths are broad and deep-rooted, including its openness, agility, approach to innovation, talent pool and high regulatory standards.
“The efficacy and transparency of regulatory authorisations will play a vital role in ensuring the international competitiveness of the UK. Getting this right will be critical to the UK maintaining its position as a leading financial centre. Regulators have taken on considerable and commendable additional responsibilities in recent times, and it is essential that high-quality and efficient delivery of their core functions are maintained and enhanced, and authorisations are a key part of achieving this. We’re confident that by working constructively together and building on the good work already being delivered by the regulators, the industry, FCA and PRA can jointly deliver an effective, more transparent authorisations regime that will bolster UK international competitiveness.”
TheCityUK’s recommendations to the regulators are to:
- Adopt a more commercially aware, efficiency-focused mindset by
- Following through on the ambitions set by regulators’ senior leaders to be more commercially aware in firm-facing operations.
- Developing a better understanding of the impact of the authorisations process on firms.
- Embrace transparency, accountability, and external engagement by
- Publishing better performance data on authorisations.
- Offering more comprehensive guidance to firms on the authorisations process.
- Enhancing engagement and communications with firms.
- Enhance internal coordination, capabilities and case management by
- Improving internal coordination and information sharing.
- Adopting a digital-first approach to authorisations.
- Implementing better training for authorisation staff.
- Streamlining processes to improve efficiency.
Further detail about these recommendations can be found in the report.
ENDS