Hardwiring finance into national security: Speech by Nikhil Rathi, FCA chief executive at the Corporation of the City of London’s annual City Dinner.

Highlights

• Conflict today hits balance sheets, funding, markets and consumers as much as any battlefield.
• Finance must be at the centre of our defence - helping to fund, insure and build the resilience on which our security depends.
• Common purpose is needed if we want the national mission and the capital to flow in the same direction: the triple dividend of security, growth and market integrity.  

Lord Mayor, this evening I want to discuss the role finance must play in our national security. 

Few have done more than you to put security and defence at the heart of the City's conversation. You are, after all, the decorated chair of the Square Mile reservists – in which the Lady Mayoress herself serves.

I can see what you're thinking: Goodness, Nikhil, couldn't you go for something a little lighter?  Something less contentious, like how to define high commission on motor finance? 

You may rather I take up your call on risk warnings or talk about our supervisory approach and the need for more consistency and pace all the way through our organisation.  Feedback we have heard and are responding to. 

You perhaps think I have nothing to offer but blood, toil, guidance and compliance. 

Not so. Security is bound up with the FCA's duty to protect and enhance the integrity of our financial system. 

Conflict today hits balance sheets, funding, markets and consumers as much as any battlefield. 

And we are not prepared, tactically or strategically. 

Whether it's a cyber-attack or a production shock - they move yields and test confidence. 

Protection gaps shake market integrity. 

Britain will not remain secure nor competitive if we treat finance as separate from our security - and if investors treat defence as separate from growth. 

With hard fiscal constraints and volatile bond markets, government cannot carry this responsibility alone.

Finance must be the bridge between mission and means, technology and capability.

Security and prosperity

I grew up in Barrow-in-Furness - a defence town. Back then, any dictator trying to paralyse Britain would have known exactly where to strike. 

At Barrow. Portsmouth. Plymouth. Clyde.

Where security and deterrence capability clustered.

Defence towns knew then what is now being rediscovered. When government, industry and finance unite behind a clear defence mission, growth is more secure. 

These towns enjoy cycles of prosperity.

Industry mobilises following ship and submarine orders. Capital crowds in, sharing risk. 

Greater security for the nation. Growth in the town.

Wages and wealth rise, supply chains deepen, skills build.

New dreadnought orders now creating thousands of jobs in Barrow, and elsewhere. 

The cycle will repeat: Mission and capability. Security and prosperity.

A world reorganising around security 

But there's a problem. 

The old model worked when you could point to security infrastructure on a physical map.

Not anymore.

Today's security spreads across a digital and financial map: data centres, payment networks, financial infrastructure, satellites, grids, cloud software and undersea cables.

Mostly privately owned, all globally connected and perpetually online.  

Such vital infrastructure can be vulnerable: Ukraine's grid targeted. ATMs in conflict zones down, settlement infrastructure at risk, shipping lanes blocked. Or the many drone incursions at airports.

In this environment, separating financial services from national security is outdated and dangerous. 

The financial system - which determines how assets are insured, invested in and built - is as vital as any arsenal or base. 

Others are hard-wiring finance into security. 

European defence spending is climbing, pulling in private capital. It's no coincidence that EU savings and investment and defence union proposals came on the same day. 

Across the Atlantic, capital has already shifted. The AI boom feeds into many aspects of defence, redefining the US economy. 

Dual-use tech making investors money: securing computers, satellites and cyber resilience. Private finance bridging innovation and security. 

With the EU and the US scaling technologies we also need fast, Britain brings a unique mix of ingredients: world-class defence primes, with BAE, Rolls Royce and Qinetiq, trading on UK markets with valuation multiples often higher than US comparators.

Extraordinary intelligence relationships, cutting-edge AI firms, top universities, trusted legal and financial institutions and deep capital pools.

Yet we treat finance as though it sits beside defence, not inside it - and we hesitate to invest in resilience on the sustained scale needed.  

These cannot be decisions for risk officers alone – rebalancing risk must be for all Executives and Boards.

Because we're defending too narrowly. Capital flows into traditional estates - shipyards, airbases, Barrows and Clydes - but leaves critical civilian infrastructure under-financed and under-armoured. 

Which leads to a protection gap.

Assets likely to be hit are privately held. When they fail, the loss is large, fast and connected.

The Jaguar Land Rover cyber incident showed how one shock ripples through the economy: An estimated £1 in every £160 of UK GDP tied to one firm and its supply chain. 

Globally, a fraction of catastrophe and cyber risks are insured. The rest migrate to company P&Ls, credit ratings, risk premia, prices, and ultimately to households.

And when cover is thin, it hits the Exchequer. That, along with the impact on livelihoods, drives popular anger.

We are potentially massively under-insuring. 

Made worse by an investment gap.

Britain has a legion of innovative firms building what this era demands: autonomy, resilient networks, advanced engineering. Yet too many stall between invention and scale. 

And when domestic capital participation is absent, overseas investors capture the upside and capability.

Consider the tungsten mine in Plymouth - strategically significant and potentially attracting largely foreign financing. 

Policy signalling is inconsistent: we talk about AI, defence and industrial strategy but haven't said clearly how finance fits or private capital should be mobilised. 

And just as we deepen security cooperation across Europe, proposed EU cross-border branching restrictions and patchwork rules raise the cost of precisely the investment our EU colleagues say they want. 

Agreeing a common purpose

So, what do we do?

Well: set the mission and clear the investment path.

The industrial strategy provides the starting point.

Financial services, digital and defence agreed as frontier industries to drive growth.

We should see them as inextricably linked, not individually discrete. Success in one relies on success in them all.

But what next?

First, let's all harness the City's expertise to address the insurance challenges. We will keep shining a light on both the risks and opportunities.

Second, the National Security Strategic Investment Fund, which finances the best startups that bring cutting edge capability to our defence and intelligence communities, is expanding. A good start, indeed one I learnt Japan wants to emulate, but I think ultimately too small. 

We could aim for a true national resilience fund, co-investing in dual-use technologies and critical systems. Perhaps through FCA-regulated long term asset funds. 

Third, be explicit on policy.

Through our reforms we're making growth capital far more accessible across private and public markets. 

Our sustainability rules don't block defence investment. There is no regulatory reason preventing defence firms from accessing banking services.

But if ambiguity creates barriers or rules get in the way, tell us. We'll act. 

Fourth, let's fix the procurement bridge: shorter cycles, faster payments, shared contracts banks can lend against.  An end to credit and investment committees perceived to default to saying “no”. 

At the FCA, we'll be investing in cutting edge security technology: to protect our perimeter, support investigations, deliver a new supervisory approach and implement new responsibilities to tackle illicit finance the Chancellor asked us to take on yesterday.

Fifth, investors and lenders must step up. 

Resilience is profitable. Power stability, secure data, cyber protection – these are cash generating growth markets.

So back British capability. Co-invest in firms and supply chains that can scale; don't leave the rewards to overseas capital. 

And, finally, close your protection gaps, not just because our rules require it. Measure operational and cyber exposures; build products, hedges and cover that protect them. 

In short: let's stop waiting for government to carry this.

Defence and resilience aren't costs outside your business model; they're growth markets you can shape.  Core to market integrity. 

Conclusion

The truth is the whole of Britain is a defence town now.  As is this Square Mile.

That changes what national security means.

Not in the sense that every town must now build submarines and bombs.

But every sector holds a piece of the nation's armour and shares the risk and reward of defending it.

Finance must be at the centre of our defence - helping to fund, insure and build the resilience on which our security depends. 

We're delivering 50 initiatives supporting growth and competitiveness this year. 

We have made hardwiring growth into regulation a strategic priority for the next five years. Helping ensure the UK remains a magnet for capital – stable and predictable in a volatile world.

Nothing in our regulatory approach will stand in the way of investment in the UK's security or sovereign capabilities. 

Because we want the national mission and the capital to flow in the same direction: the triple dividend of market integrity, growth and security.