The FCA has published its 2022/23 business plan and strategy. The new three-year strategy and annual plan are designed to help firms understand the areas of focus for the regulator, the risks and harms it is concerned about and its upcoming work plan.
Despite it being only nine months since the FCA published its three-year strategy in July 2021, the FCA has fundamentally revisited its approach and the associated business plan. It has taken a more holistic and outcomes-focused approach than has been seen previously — the strategy and plan feel very different to what has gone before.
However, close inspection of the details reveals that they are closer to a repackaging of existing commitments rather than a seismic shift or change of focus. The key step change is the degree of accountability and the granularity of the metrics that the FCA will use to measure its progress. The strategy will now be fixed for the next three years to enable the FCA to assess how well it is performing against its areas of strategic focus.
Within its new strategy, the FCA has set out:
- Three areas of focus (reducing and preventing serious harm, setting and testing higher standards and promoting competition and positive change).
- Four consistent topline or overarching outcomes, fair value, confidence, access, and suitability & treatment. The first three apply to both wholesale and retail, whilst the last only applies to retail.
- Thirteen commitments which will drive specific regulatory activity over the next three years. The specific activities that the FCA intends to perform this year to deliver these commitments are captured in the Business Plan.
Additionally, the FCA provides an update on its transition to a data-led regulator, its national locations strategy, and its ongoing commitment to improving its diversity and inclusion.
A re-focused and articulated strategy
To illustrate its movement away from being process-focused to results-focused, the FCA has re-articulated its strategy via the outcomes it expects all firms to deliver. The new three-year strategy is intended to drive focus on:
- Reducing and preventing serious harm
- Setting and testing higher standards
- Promoting competition and positive change
Underneath these areas of focus, the FCA has captured what it terms 'consistent topline outcomes'. This are overarching outcomes which cut across all sectors. This approach is designed to enable the FCA to combine its capabilities to address concerns and opportunities efficiently, effectively and consistently.
Finally, the FCA has set out thirteen underpinning commitments detailing activities that it will undertake and how it will measure its impact.
A business plan focused on desired outcomes
The FCA's associated business plan has a stronger alignment to the FCA's strategy than we have seen previously and it flows directly from it. Essentially, the business plan explores each of the commitments setting out (i) the outcomes it wants to achieve, (ii) how it will measure progress and (iii) how it intends to achieve the outcomes.
As previously announced, the FCA has committed to report against the strategic outcomes and metrics that it would set over a multi-year period. This business plan gives details of some of the proposed metrics to measure progress against the FCA commitments for 2022/23.
Focus 1 — Reducing and preventing serious harm
Focus 2 — Setting and testing higher standards
Focus 3 — Promoting competition and positive change
Increased FCA accountability via formal metrics
The FCA has set out detailed metrics to measure progress against the `topline outcomes' it is trying to achieve. Where metrics already exist, baseline values are provided. In cases where metrics are not yet available, the FCA has explained its plans for the future. The metrics will be further updated and developed through 2022/23.
The FCA has also reported on the seven strategic transformation-linked outcomes and metrics that formed part of last year's business plan.
FCA assesses its own positive impact
Following on from the accountability theme, the FCA has published: for the first time, a paper designed to set out how it delivers public or societal value. This paper, designed to be a regular (presumably annual) publication, provides quantified estimates of the positive impact of a subset of its activities — specifically its policy interventions and enforcement work. The report includes value for money considerations which reflect the FCA's estimate that it has generated a benefit of at least £6 billion per year over the three-year period. This implies a benefit of at least £11 for every pound spent on running the FCA.
FCA increases in funding requirement
The FCA's annual budget reflects the cost of the resources it needs to carry out its proposed work in 2022/23. The key figure for firms is the Annual Funding Requirement which is the total amount that the FCA charges the financial services industry to fund its activities. The proposed funding requirement for 2022/23 is £640.1m — an increase of 4.3% on 2021/22.
Alongside the strategy and business plan, FCA has also published its annual consultation on regulatory fees and levies, which provides further information about its funding requirement and the impact on specific firm's activities. Alongside the funding requirement, the FCA is also proposing minor changes to its fees and levies policy including:
- Changes to FCA periodic fees — including the new structure of minimum fees for the `A' fee-blocks and consumer credit firms.
- Integrating its new structure of application fees to credit rating agencies and trade repositories (including third country firms seeking certification as either).
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