FCA publishes its 2023/24 Business Plan

The FCA has published its Annual Business Plan. Much of the plan reiterates activity that is already in train, published or scheduled with very little that is new or materially altered. This is understandable as last year the FCA published a three-year strategy. Interestingly however, the metrics to which the FCA announced last year it would hold itself accountable have not been reported. These will now be published later in 2023 as part of the Annual Report. 

The most notable announcement in the plan is the creation of a new Interventions team within Enforcement specifically for Consumer Duty. This function will be operational from August 2023 to enable rapid action where immediate consumer harm is detected.

Although its three-year strategy remains unaltered, with delivery across 13 commitments, the FCA has decided to invest further in the four commitments it has identified as critical in the next 12 months.

1. Putting consumers' needs first

The FCA will continue to prioritise protecting people from unfair treatment, with more staff being allocated to ensure firms support consumers who are struggling financially. Further, the FCA has committed to providing additional resource (£5.7m) to ensure that Consumer Duty is embedded effectively. Here the FCA has (again) dangled the carrot of a `more simplified approach to regulation.' 

2. Preparing financial services for the future

The FCA will continue its urgent work relevant to the new Future Regulatory Framework (FRF) and Edinburgh Reforms, which will help support the UK's wider economic growth and international competitiveness. More than £12m will be invested to prepare for the FRF, including the orderly movement of firm-facing requirements in retained EU law into the FCA Handbook. Critically, and likely to be welcomed by the industry, a new cost benefit analysis panel will also be established to support the effectiveness of the FCA's programme of work. 

3. Strengthening the UK's position in global wholesale markets

Alongside continuing regulatory reform in secondary markets and of the Listing regime, the additional funding for this commitment will be focused primarily on strengthening the FCA's capability and capacity to predict and react to events in global markets, including heightened volatility. 

4.Reducing and preventing financial crime 

The FCA continues to look for innovative ways of reducing and preventing financial crime, which harms confidence and integrity in the UK market and puts consumers' money at risk. Initiatives include a strengthened authorisation process, increased covert capabilities to identify and disrupt fraudsters, improved assessments of firms and more staff to investigate and prosecute offenders.

The FCA also identifies specific challenges for the year ahead:

Key Uncertainties

The FCA expects the economic and geopolitical environment to remain highly uncertain over the year ahead and has flagged the following specific uncertainties:

• Interest rates and inflation.
• The risk that unemployment increases more than currently projected.
• Potential for further declines in real household disposable incomes.
• Potential for further market volatility.

Wholesale markets

Although wholesale markets have recovered from gilt market volatility and the impact on pension funds in the autumn, the FCA will remain alert to potential problems and be ready to act (as firms will need to be) if necessary, to manage heightened operational and market risks.

Cost of living and Consumer Duty

Rising interest rates and inflation have contributed to an increase in the number of people stretched financially and many consumers face significant financial pressure. The FCA will identify and track early indications of problems to enable it to respond proactively.

As established in last year's Business Plan (summarised here), the FCA has three key focus areas:

• Reducing and preventing serious harm.
• Setting and testing higher standards. 
• Promoting competition and positive change.
  

The rest of the plan mainly provides detail on the progress of work that the FCA will be continuing (coupled with supporting data). There is, however, also confirmation of key new activities that will commence in 2023/4. As referenced above, the most impactful of these will be the creation of a new Interventions team in relation to Consumer Duty Some of the other `new' areas are surprising, less in relation to the ambition and more that it was not activity already underway — see the entry below on taking more action against problem firms.

The FCA has also published the consultation on its fees and levies for the year ahead. In recognition of the pressure firms are under, it proposes to freeze application fees, and the minimum fees paid by firms.

Firms will want to review the actions set out in the FCA's plan and reassure themselves that they are well positioned to respond. 

Alongside continuing strong focus on its primary operational objectives, the FCA is beginning to adapt to its likely new secondary objective to facilitate international competitiveness of the UK economy and this may provide opportunities for firms.

It is clear that the FCA plans to request more data from firms and seek to respond to market events in a more agile way. To illustrate this point, given that the FCA is setting up a new Intervention team to take action in short order on outliers, firms impacted by the Consumer Duty should focus in the immediate future on gaining comfort that they have appropriately considered its implementation. For more detail about how to approach the Duty, read our recent article on substantive compliance — and how far is far enough.