UK regulator calls for freedom not free-for-all
Like that lacklustre movie Braveheart, the UK’s Financial Conduct Authority (FCA) says you will never take away our freedom and the chances of a free-for-all for regulations will never happen.
In a speech that had more repeats than the UK TV channel Dave, Christopher Woolard, FCA’s executive director of strategy and competition, told the audience at the Cheung Kong Graduate School of Business, Shenzhen in China, that the FCA intervenes where competition can’t perform its function and there’s a risk of consumer harm.
Most of Woolard’s words covered old ground – such as what the FCA does, its sandbox, and how it promotes innovation; but he was keen to tell the China crowd that a “regulator’s approach can be both progressive and protective”.
Woolard says firms “have to be given space and support in order to innovate in the interests of consumers” but giving firms that freedom doesn’t mean it has to “sacrifice our objective to protect” them.
He adds: “We have no intention whatsoever of presiding over a free-for-all, and a thriving innovation culture does not mean a regulatory Wild West.”
The issue of trust was something Woolard warmed to considerably. He quoted the British journalist and writer Walter Bagehot from 1873: “The peculiar essence of our financial system is an unprecedented trust between man and man; and when that trust is much weakened by hidden causes, a small accident may greatly hurt it, and a great accident for a moment may almost destroy it.”
Looking ahead, rather than back to 1873, Woolard says the success of today’s innovations rely on trust. He states: “This sits at the intersect between the two cornerstones of our approach: competition and consumer policy.”
When these two work together a “virtuous circle” occurs – firms enter, innovate and compete to meet consumer needs, and, according to Woolard, it is regulation that can give consumers the confidence to participate in the first place.
What the Chinese audience made of all this will be interesting. But we’ll probably never know. They don’t reveal a lot.
Meanwhile… in Hong Kong
Away from this speech in China, the FCA announced today (12 May) that it has signed a fintech co-operation agreement with the Securities and Futures Commission (SFC) in Hong Kong.
Under the agreement, both will co-operate on information sharing and referrals of firms seeking to enter one another’s markets.
Woolard says: “In the last few months alone we’ve signed agreements with colleagues in China, Japan, Canada and the Hong Kong Monetary Authority [HKMA]. Working with other regulators internationally, we want to build a common understanding of the principles of good innovation.”
Having signed a similar agreement with HKMA in December 2016, today’s announcement means that the FCA now has agreements with a number of “key” regulators in Hong Kong, which “will be important given the breadth and speed in development of the fintech sector”.