Important signals from the FCA
Andrew Bailey, the CEO of the Financial Conduct Authority (FCA), made a speech in April that made it clear Britain favours a “low burden” approach to financial regulation after we leave the EU. You could say that this was music to my ears, the main reason being that, time and again, it has been demonstrated rigid ‘ticky-box’ rules tend eventually to be circumvented by wily opportunists and their smart legal advisers. The trouble is, if you continually tighten the rules in the name of protecting consumers, you can end up choking to death an entire industry just to eradicate a minority.
Mr Bailey was at pains to emphasise that, while this approach would herald a return to a “more flexible, principles and outcomes-based system” it should not be interpreted as light-touch. It’s not just about harmonising rule books, but more about addressing what really happens in practice.
Of course, at no time during his speech did the chief regulator make specific reference to P2P – this was about financial services in the round – so perhaps I shouldn’t read too much into how this might impact our sector. A couple of weeks ago, in an article predicting a crackdown from the regulator that could result in the sector’s demise, the Sunday Times (ST) quoted Christopher Woolard, a director of the FCA, as saying: “Loan-based crowdfunding can play a valuable role in providing finance to small businesses and individuals, but it is essential that regulation stays up to date as the market develops”.
That statement doesn’t really tell us very much. The P2P sector has been waiting a long time for a finite set of rules, although, as the ST reminds us, we had a glimpse last year when the FCA published an interim paper. Let us hope that common sense prevails and that the P2P sector – whose principal crime appears to be that it has successfully bridged a glaring gap in the marketplace – is allowed to evolve and fulfil its potential. Establishing a business from scratch in a competitive environment takes time and money and short-term profitability is not always an accurate measure of ultimate worth. Just ask Amazon, now the world’s largest retailer.
As an aside, what Mr Bailey’s speech also tells me is that he has unfinished business at the FCA and that, for the time being at least, he shouldn’t be pressured into taking on the role of Governor of the Bank of England. He is doing far too good a job where he is.