Speech by Nikhil Rathi FCA Chief Executive : A reform-minded regulator
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Highlights UK markets are performing well and offer tried and
tested stability under pressure – with the deep liquidity,
resilient infrastructure, and reliable execution that firms need to
serve their clients. In a new era of heightened pace and
volatility, stability will require adaptability and agility in the
face of market and technology evolution. The FCA is a reform-minded
regulator: open, responsive and willing to make changes at pace to
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Highlights
"When I saw that a boxing ring had been temporarily installed in this room last autumn, I wasn't quite sure whether it was a warning to us regulators… Or some kind of art installation commenting on the past few years in financial markets. At some points it has felt bruising, to say the least. Some pressures have been sharp and immediate – geopolitical shocks, sudden market events. Others slower but no less significant – shifting liquidity, evolving market structures. And then areas moving at exceptional pace – particularly in technology – where the direction of travel is clear, even if the endpoint is not. We are hearing how difficult it is to make decisions with confidence, not just today, but for the longer term. So the question for regulators is: how do we contribute to the conditions you and your customers need to succeed? Not just stability and predictability, but also the space and confidence to innovate and take risk. And how do we do that in a way that supports the UK's competitiveness and growth? Proven under pressure Looking briefly at where we are: Firm resilience has been impressive given the challenges – to your credit. And the UK as a global financial centre remains robust. We've seen staggeringly high volumes this year: +69% growth in Brent trading over the quarter, 55% in Gasoil, 44% in copper derivatives. Over 100% growth in short term interest rates futures (SONIA) since the same time last quarter, and +21% in UK gilts. And London now just a single point behind New York in the Global Financial Centres Index. All clear signals that in times of operational and geopolitical stress, global clients trust the UK. They know ours is a system proven under pressure, with the reliable execution, deep liquidity, and resilient infrastructure they need to do business. Foreign banks – London hosts more than 160 – are central to that success. Injecting the global talent and expertise, liquidity, market depth, and scale, that takes our financial services industry from a domestic hub to a truly international centre… And enriching the economic stability, growth and competitiveness of our country. We are very pleased to have you all here. Adaptive stability So how do we maintain that fundamental resilience, while strengthening competitiveness? The instinct in turbulent times can be to try to hold things in place. To ensure certainty by limiting change, to manage volatility by tightening control. Just standing still, covering up and absorbing the blows, hoping and waiting for the referee to call time. There's an understandable logic in that. But it's not enough when markets themselves are not standing still. Some metrics suggest AI capabilities are doubling every 7 months – much faster than traditional tech growth rates. Business models and consumer needs are evolving. The execution landscape becoming more complex. This isn't a blip to ride out; it's a new era of heightened pace, with all the attendant risks and opportunities. The key to long-term strength and stability is responding to those changes, rather than resisting them. Embracing an adaptive stability. A reform-minded regulator For the FCA, that means being a reform-minded regulator. Willing to change what needs to change. Being open about where our understanding of new trends is evolving, and where we need partnership to make sense of them. You can see that in our wholesale reforms:
Our reforms supported the strongest year since 2021 for UK listings, and more than 50 significant transactions that would've previously required a shareholder vote, getting executed faster. For those of you providing retail services, our approach involves rebalancing risk. Our reforms to mortgage rules mean lenders can now offer about £30,000 more to many borrowers – helping more into home ownership. With more reform to come on later life lending and to reflect changing employment patterns. Targeted support is landing well, opening up new opportunities for millions of people to make the most of their savings. And in payments, we've just removed the contactless payment cap, allowing lenders to respond more flexibly to inflation, consumer behaviour and advances in payment technology. So a consistent thread in the FCA approach: Commercial awareness. A willingness to act at pace to improve outcomes. And responsiveness to how markets and consumers are actually behaving. Because we know that success is about more than just getting the rules right on paper; it's about how markets operate with them in place. That focus on execution and real-world outcomes is really at the heart of how we are thinking. Innovation That's particularly important when it comes to digitalisation, where things are evolving rapidly. For regulation to keep pace, we have to remain clear about our standards, but more flexible in how they are applied. Today the FCA has published new guidance on how firms can use distributed ledger technology within our rules. Including an optional Direct to Fund model, which can simplify how funds – traditional or tokenised – deal with investors. We're working closely with firms on a sustainable crypto framework, ahead of the authorisations gateway opening in September. Including adding a dedicated stablecoin cohort to our Regulatory Sandbox and running a policy sprint with industry, so firms can test responsibly while we develop regulation in step with the market. We know that as the market develops, we'll need to be open to tweaking our rules – and doing so in a way that supports competition and growth. When it comes to AI, we feel our existing frameworks provide sufficient oversight. Giving us a competitive edge to flex to market changes as they happen, without having to constantly write new rules that are quickly outdated. And our Innovation services - our AI Lab, Supercharged Sandbox and Scale Up Unit - are helping firms to experiment, and to get to market faster. Please do make full use of those. Work with us as new models emerge – so regulators and firms are learning together, in real time. Market integrity So a wide range of purposeful and proportionate regulatory adjustments. Designed to rebalance risk, and help make UK markets more efficient, accessible, and competitive. But I want to be equally clear. None of this – reform-mindedness, flexibility, adapting to change – comes at the expense of high standards. The FCA's primary task is to ensure market integrity. In a more volatile global environment, that only becomes more important. So fighting financial crime is a priority for us and we are increasingly hawkish. Stepping up action on market abuse and insider trading. Bringing more prosecutions than we ever have. Working with partners using the full breadth of our powers. I've spoken recently about the link between finance and national security. That in a world of exponentially growing organised crime, the UK will not remain resilient or competitive if we treat finance as separate from our security. We all share that responsibility, and firms are a first line of defence in maintaining strong systems and controls. Nowhere more so than investing in cyber defences, as new capabilities advance rapidly. We are consulting on how to strengthen our transaction reporting regime, and will be expanding our data quality function this year. Timely and high-quality data means we can be more proportionate and targeted in our work, but we won't take our foot off the pedal on market integrity. Smarter regulator That said, we are open to achieving our aims in different ways. Supervision is a good example. I know Mark Francis, wholesale sell-side director, is looking forward to taking you through the detail at your conference next month, so I won't steal his thunder. But since I last spoke to the AFB, we've significantly changed how we engage. Merging our supervision and policy teams has shortened the feedback loop, enabling us to be more agile in how we regulate. We can now turn market feedback into better rules more quickly – as this week's announcement to cut IPO lead times by seven days shows. More firms now have dedicated relationship managers. We are publishing sector-specific Regulatory Priorities reports. And we are doing more multi-firm work, including on quantitative investment strategies – a growing area – and emerging markets. So even where firms don't have a direct supervisory relationship, they have examples of good practice and know what is on our mind. Legislative reform of the Senior Manager and Certification regime is on the way, but in the meantime we're moving at pace on changes we can already make, including announcing last week:
Targeted adjustments to reduce cost and complexity, without compromising on accountability. International And it's not just firms we are engaging more thoughtfully with; it's our international partners too. At a time of geopolitical uncertainty and major investment needs, our preference is for open and integrated corporate lending markets across Europe, rather than a drift towards measures that risk fragmenting cross‑border finance. We know you face an increasingly complex regulatory environment. Particularly in areas like sustainable finance, where standards and timelines aren't always lined up. Our approach is to implement internationally-aligned standards – as Hong Kong, Singapore, Japan, and others are – but in a way that is flexible, proportionate and pragmatic. Your feedback on how that's working in practice is always welcome. We want to build interoperability where possible. We've stepped up our engagement with the EU, US, Japan, China and many others. And with Switzerland, we've implemented the most ambitious arrangements to date. We're placing secondees in the Office for Investment, and building our own FCA global network; a presence in the US, Singapore and the wider Asia-Pacific region, with more on the way this year. That is already helping us connect with international investors to promote the UK. But it's also about learning from other regulators and jurisdictions, to see how we can bring the best of that back to our markets. Incredible things are happening in Asia-Pacific on digitalisation and tech, for example. So we really value those international partnerships. And the presence of international firms here in the UK. We don't just regulate you, we learn from you too. Conclusion So Sir Nicholas – if the current Lady Mayor is interested in taking up martial arts, perhaps you might suggest she consider judo, rather than boxing? Because as I hope I've shown, in a world like this, it's not just about taking punches and trying to stay on your feet. It's about using momentum, re-directing pressure… Being efficient and targeted with our energies … Staying balanced, while being ready to adapt as conditions evolve. That is the approach we are taking at the FCA. Clear about our standards, and rigorous in how we uphold them. But also open – working with the market, willing to make changes where needed, reform-minded. It's what will allow you to manage risk, deploy capital and serve clients even in uncertain times. And, we believe, it's what will help ensure the UK remains a competitive global financial centre." |