On 2 October 2018, the FCA published a speech by its chair, Charles Randell, on the cycle of deregulation, crisis and regulation.
Randell highlights that deregulation, typically where policymakers repeal existing rules, has led to previous financial crisis. A form of deregulation often overlooked is where policymakers do not apply existing rules to new innovations – leading the industry to deregulate itself. The consequent repeating cycle of deregulation, crisis and regulation is significantly damaging to the general public and saps public confidence in the regulatory process.
Randell expresses the view that an open mind is needed by regulators to be aware of the shortcomings of their existing rules; continuous improvement and review is required by regulators. For this reason, Randell makes clear that such review will be incorporated by the FCA in light of the UK’s withdrawal from the EU to ensure firms absorb any regulatory changes stemming from Brexit.
To avoid over-regulating, Randell notes the FCA’s safeguard against unjustified regulation is crucial to ensure the sound creation of policy decisions. As well as conducting a cost-benefit analysis of implemented regulation, the FCA is seeking to extend its evidence base into the area of real world consumer behaviour to truly assess the impact of regulation on individual consumers rather than aggregates.
Randell concludes his speech by noting that in no way will the UK’s withdrawal from the EU enable the UK to join a ‘race to the bottom’ in regulatory standards. He states that the “FCA does not see the UK’s withdrawal from the EU as an opportunity to join a race to the bottom in regulatory standards – quite the contrary. We will need to redouble our engagement with our policy making and regulatory colleagues in Europe and across the world, to continue to influence global standards of financial regulation.”
He also adds: “This is most definitely not a zero sum game. Open and consistently regulated financial markets bring benefits to consumers and businesses in all jurisdictions. That’s why I believe that consumers and businesses across Europe will expect to have continued access to the best financial services that are available in their time zone, maximising their own welfare and the potential of their nations’ economies.”