FCA CEO Nikhil Rathi has signalled a move away from a strict rules-based approach on regulation to an outcomes-based approach based around the Consumer Duty and supervisory tools.
His comments in a new industry podcast confirm a steady shift by the regulator towards addressing market failures through supervision, enforcement and greater adherence to the Consumer Duty.
He makes his comments today in a new podcast from consumer finance lobby group Fairer Finance.
Mr Rathi said constantly writing new rules was not always the answer to regulatory shortcomings.
Fairer Finance calls the comments a "fundamental shift" in the regulator's approach.
Mr Rathi says in the podcast: "Not every problem is going to be solved quickly by doing big interventions, more rules, bans, guidance."
"I think that there's a whole range of influences that are informing our willingness to write lots of new rules…. we're moving to an outcomes-based approach, and that will mean less rules in the future because we think the Consumer Duty will do a lot of the work for us.”
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Mr Rathi said it was no secret that the Treasury was not a big fan of transparency and the FCA's actions when it came to firms.
He added: "They were very persuaded by some of the lobbying they received on that topic. Nonetheless, we are stepping up the way in which we communicate through our enforcement watch.”
The admission was in response to a question about the FCA's use of Voluntary Requirements (VREQs) – which enable the regulator to require changes from firms without public announcement or enforcement.
Mr Rathi also suggested that cross-subsidies and distributional fairness in products like credit cards and premium finance were, "not within our mandate to decide on," placing responsibility instead with the Treasury and Government.
James Daley, managing director of Fairer Finance, said: "This was a remarkably candid interview, and credit to Nikhil for being so open about the pressures the FCA is under and the trade-offs they're making.
“We are of course disappointed to see confirmation that the FCA is stepping back from tackling problems with new regulation. While the Consumer Duty provides a useful framework for the FCA to tackle poor conduct on a firm-by-firm basis, there are a number of wider market failures that won’t be addressed without new rules or much clearer guidance.
“Nikhil’s comments will also be hard reading for those who are campaigning to eliminate the poverty premium. While there are certainly some social policy issues where the FCA may need the Government to take the lead, there are a number of areas that are within the FCA’s remit to address. In particular, the credit card market continues to rely on unfair cross-subsidies which mean that the least financially resilient subsidise the better off. These business models arguably breach the FCA’s fair value rules – but it looks unlikely the FCA will address them in the current political climate.”
Mr Daley added: "What's clear from this interview is that the regulatory winds have changed over the last 18 months. The FCA is under pressure from the Treasury to prioritise growth and to deal with market failure and misconduct through supervisory conversations behind closed doors. As Dame Meg Hillier pointed out last week, the Chancellor has had only one meeting with a consumer group since taking office – compared to dozens of meetings with banks, insurers and asset managers. And it’s clear that this emphasis from Treasury is also following through to the way its regulator acts.”
Other key remarks from Nikhil Rathi in the podcast:
- Enforcement: 40 enforcement outcomes in 2024 vs 30 in 2023. Six Consumer Duty cases now underway.
- Financial crime: Record number of criminal prosecutions; 84% of crypto firms applying for money laundering registration rejected
- Financial Ombudsman: 12 months without a CEO, 6 months without a chair – Rathi downplayed concerns, praised interim leadership
- Targeted support: Launches April 2026 for pensions/investments; Rathi said: "We're focusing on the initial markets for the 6th of April. We'll see how it all works. We're seeing a whole range of providers coming in and then we'll look at where we may want to go with this in the future.”
Podcast: https://www.fairerfinance.com/insights/podcast