The Financial Conduct Authority (FCA) is showing signs of an impending overhaul of conduct regulation should politics and the industry allow it, according to a prominent consultancy.
Lansons public affairs and regulatory consulting board director Richard Hobbs said in a blog post that there were signs that the FCA was looking for a fresh approach to conduct regulation but would not be able to innovate without the help from the industry.
The post, which was published by the Chartered Insurance Institute (CII) as part of its Thinkpiece series, pointed out that the FCA had been given new objectives for market regulation.
In particular, the FCA was handed the objective of promoting effective competition in the interests of consumers, Hobbs said.
This includes facilitating market entry for new customers and those in areas affected by social or economic deprivation.
Hobbs said: "No regulator has been asked to think about these matters before. Quite how it will think about social and economic deprivation, barriers to market entry and innovation is not yet clear."
However, he added: "We might reasonably assume that behind closed doors FCA and Treasury officials are thinking quite hard about what these new legislative requirements mean.
"It would be a controversial outcome if the FCA paid these new objectives no more than lip service and the better view of it is surely that they will develop new ways of thinking about their responsibilities."
Hobbs said that there were signs the regulator was open to change.
For instance, he pointed out, the FCA was showing great interest in behavioural economics and had hired a number of competition economists and former practitioners.
However, he warned that political pressures could get in the way of any attempt to innovate the FCA.
To ensure innovation can happen, Hobbs said, the industry had to think in the long term and actively support the regulator.
"It is a time for investing in engagement not giving up or lying low. If the regulator is prepared to run risks from innovating, so should the industry.
"It would help greatly if all of the industry put its best foot forward."
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