UK Industrial Strategy Sector Plans – Financial Services

Proposals include adapting the current ‘fair and reasonable’ test, introducing a mechanism in seeking the Financial Conduct Authority’s (FCA) views on the interpretation of its rules, introducing an absolute time limit for bringing complaints and making it easier for the FCA to intervene quickly on mass redress events. These changes will enable the FOS to return to its purpose of being a simple, impartial dispute resolution service whilst improving predictability and consistency of outcomes for both consumers and firms.

The Plan will shorten the following statutory deadlines which the FCA and Prudential Regulation Authority (PRA) must meet:

• Reducing the deadlines for new firm authorisations and variations to permissions by two months from six months to four months for complete applications and from 12 months to 10 months for incomplete applications; and
• Reducing the deadlines for the appointment of senior managers by one month from three months to two months.

In addition, HM Treasury has agreed to set more ambitious targets with the regulators where they will seek to progress matters faster than the statutory deadlines where possible and report against these.

The FCA has been asked to report to the Chancellor on how it plans to address concerns that the current approach is too heavily based on a ‘one size fits all’ approach and that the scope of the protection extending to firms who do not serve or sell products directly to retail consumers. The FCA’s report will set out how it plans to address concerns about the way in which the Consumer Duty works for wholesale firms and how it will provide certainty on the categorisation of professional clients.

The Plan aims to tailor bank capital requirements to ensure that UK banks can compete internationally and provide the lending and investment needed to drive growth by:

• Ensuring that minimum requirements for own funds and eligible liabilities are proportionate to remove barriers to expansion;
• Implement Basel 3.1 in a way which ensures certainty and reduces complexity; and
• Making meaningful reforms to the ring-fencing regime to allow ring-fenced banks to provide more products and services to UK businesses, address inefficiencies in how ring-fencing is applied to banking groups and examining the case for allowing banks to share resources and services more flexibly across the ring-fence.

The Government will focus on regulatory change to improve growth and competitiveness in five priority areas (asset management and wholesale services, insurance and reinsurance markets, sustainable finance fintech and capital markets (including retail investment)).

The Government will achieve this by remaining an open, globally connected financial centre which is underpinned by strong international partnerships, bilateral and multilateral co-operation.

The Government will achieve this by prioritising financial services as part of its Trade Strategy and establishing policy that facilitates greater collaboration and safe market access.

The Government will work closely with the industry to advance the attractiveness from the UK on the issues of the future including cyber to climate, advance major new investment opportunities in sustainable infrastructure and mobilise capital towards emerging markets and developing economies.

The UK will continue to play a leading role internationally (including through international organisations and standard setting bodies such as the Financial Stability Board) and uphold commitments to international regulatory standards, shape future reforms and promotes interoperability with other countries.

UK Research and Innovation will focus support by pivoting its programmes and budgets towards research and innovation priorities. This will support financial services firms to use cutting-edge research to innovate and provide new services.

This will build on the FCA and PRA’s work to support early-stage innovative firms. The regulators will also support firms to build on their understanding of regulatory requirements as they scale and ensure clear points of contact to ensure access to relevant technical and specialist support, including as firms apply for new regulatory approvals.

The FCA will launch a Smart Data Accelerator which, amongst other things, will help shape regulatory policy for Open Finance and drive progress on the Smart Data initiative. Which could have significant potential in improving access to finance for SMEs.

The AI Champion will be a catalyst for the adoption of AI and innovation in financial services (with a particular focus on priority areas such as asset management and wholesale services, insurance and re-insurance and capital markets (including retail investment)). The Champion will be focused on how AI can drive growth in financial services, including by improving customer outcomes.

The Government recognises that the UK has the lowest rate of retail investment in the G7 and wants to address this in order to raise living standards and ensure everyone is empowered to make the choices that work for them in how their money is held. The Government will therefore work with the FCA to roll out targeted support for consumers and support an industry-led campaign promoting the benefits of retail investments to consumers.

This will enable more people to access longer-term investment options and reflects the Government’s aim to ensure that those who have the ability to put money away for the long-term have access to a range of products that enable them to do so.

This will ensure that the UK is harnessing the potential of new technologies to drive change and ensure the future competitiveness of the wholesale markets. The Government will therefore publish a Whole Financial Markets Digital Strategy setting out its vision for digitising the UK wholesale markets and reducing inefficiencies. The Government will also publish a report setting out a staged approach to removing paper share certificates and modernising the UK’s shareholding framework to deliver a more coherent system with reduced costs.

This letter will confirm that the Bank of England should have a strong focus on facilitating innovation as it regulates financial market infrastructure firms. This will help create a more dynamic, efficient and digital financial services sector.

The Financial Services Skills Commission (FSSC) will develop a sector-led compact that will accelerate progress and ensure that the sector has the skills to thrive in the future. The FSSC will also commission a report on the AI skills needed to drive growth and productivity in the UK financial services sector.

The Government will simplify and improve access to the Global Talent visa to make it easier for exceptional individuals to access and bring their skills and ideas to the UK. Eligibility for the High Potential Individual visa will also be expanded and the Government will explore reform of the Innovator Founder visa to support access by entrepreneurial talent.