The UK’s Financial Conduct Authority (FCA) wants to support investors making their own investment decisions, but its chief economist and director of strategy, Kate Collyer, has stressed the importance of understanding the potential trade-offs to avoid “significant harm”.
Speaking at the Investment Association’s annual conference on Thursday, Collyer noted the regulator’s five-year strategy and its role in supporting UK growth.
She acknowledged that pursuing growth objectives can present more risk: “The risk that consumers might make mistakes, or the risk that firms or markets might fail or act separately, and of course, the risk of regulations being too loose.”
To address this, Collyer said the FCA is opening up the debate about the balance between risk, tolerance and failure. She said: “We need to explore the safety zone where we can increase risk without significant harm. We need to understand the trade-offs as we decide how much risk is brought in, and we need to do so in a deliberate way.”
Collyer said that capital markets already reflect that approach to rebalancing risk. “Last year, we set out reforms to help strengthen the UK capital markets, including the most significant changes to the listing regime in 40 years.”
When it comes to investors, Collyer said the FCA wants them to make their own decisions but urged investors to ensure that systems, markets, and information can be trusted.
Speaking during a separate panel, Julia Hoggett, chief executive officer of the London Stock Exchange, praised the regulator for “significant change” over the last few months, highlighting a number of incoming proposals from the FCA.
Noting that the UK has a principle-based regulation that is driven by firms’ compliance responses as well as their risk appetite, she said: “Risk appetite shift is not just a shift on the part of politicians and regulators. It’s on the part of those implementing and applying the rules as well.”
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