FCA to deploy expanded technology solutions
31 October 2022 UK
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As a key factor behind the Financial Conduct Authority’s (FCA) “improved efficiency” during the last year, the organisation has announced plans to deploy expanded technology solutions going forward.
The FCA’s chief executive Nikhil Rathi revealed that “significant progress” had been made on the authority’s backlog due to the investment in automation. Rathi also praises the FCA’s increasingly robust gateway after lessons learned from independent reviews. Currently, one in five firms are initially rejected for authorisation, compared to one in 14 in 2021.
During a speech regarding the role of the body in the context of the UK’s changing regulatory landscape, Rathi said that the past two years had been punctuated by multiple “one in a hundred-year” events.
A number of unprecedented disruptive market events have also occurred, including the default of Archegos and the “extreme turbulence” in the commodity and fixed income markets.
In each case there was significant use of leverage — sometimes hidden leverage — concentrated counterparty risk and margin modelling based on periods which did not address the stresses that “crystallised”, said Rathi.
Reviewing each event, Rathi highlighted a need for better regulatory and risk reporting, as well as domestic and international oversight — a focus for the authority.
The chief executive also noted the FCA’s current work with the Bank of England on the use of artificial intelligence (AI) in the regulatory framework. The FCA’s AI discussion paper examines the benefits, risks and suggested solutions regarding this technology, and encourages the industry to engage with the paper to create the right framework for the future.
Similarly, the regulator’s consultation paper on Big Tech examines the innovation that tech giants could bring to financial services, as well as the risks of their potential dominance which could harm consumer outcomes. The consultation process will inform the FCA’s approach to digital markets.
In response, Dr Henry Balani, global head of industry and regulatory affairs for Encompass Corporation, comments: “Amidst a turbulent economy and a complicated geopolitical landscape, the UK faces uncertain and challenging times.
“It is essential that businesses and the government remain committed to upholding the highest regulatory standards and encouraging innovation as a key component in order to achieve as much stability and growth as possible — now and in the future.”
Balani notes that there is much to be done to further improve the regulatory framework and overall compliance in the UK. He concludes: “As we progress, we must continue to focus not only on regulatory oversight, but also on fostering innovation and the use of the latest in technology to assist businesses when it comes to their own compliance processes as the landscape evolves.”
The FCA’s chief executive Nikhil Rathi revealed that “significant progress” had been made on the authority’s backlog due to the investment in automation. Rathi also praises the FCA’s increasingly robust gateway after lessons learned from independent reviews. Currently, one in five firms are initially rejected for authorisation, compared to one in 14 in 2021.
During a speech regarding the role of the body in the context of the UK’s changing regulatory landscape, Rathi said that the past two years had been punctuated by multiple “one in a hundred-year” events.
A number of unprecedented disruptive market events have also occurred, including the default of Archegos and the “extreme turbulence” in the commodity and fixed income markets.
In each case there was significant use of leverage — sometimes hidden leverage — concentrated counterparty risk and margin modelling based on periods which did not address the stresses that “crystallised”, said Rathi.
Reviewing each event, Rathi highlighted a need for better regulatory and risk reporting, as well as domestic and international oversight — a focus for the authority.
The chief executive also noted the FCA’s current work with the Bank of England on the use of artificial intelligence (AI) in the regulatory framework. The FCA’s AI discussion paper examines the benefits, risks and suggested solutions regarding this technology, and encourages the industry to engage with the paper to create the right framework for the future.
Similarly, the regulator’s consultation paper on Big Tech examines the innovation that tech giants could bring to financial services, as well as the risks of their potential dominance which could harm consumer outcomes. The consultation process will inform the FCA’s approach to digital markets.
In response, Dr Henry Balani, global head of industry and regulatory affairs for Encompass Corporation, comments: “Amidst a turbulent economy and a complicated geopolitical landscape, the UK faces uncertain and challenging times.
“It is essential that businesses and the government remain committed to upholding the highest regulatory standards and encouraging innovation as a key component in order to achieve as much stability and growth as possible — now and in the future.”
Balani notes that there is much to be done to further improve the regulatory framework and overall compliance in the UK. He concludes: “As we progress, we must continue to focus not only on regulatory oversight, but also on fostering innovation and the use of the latest in technology to assist businesses when it comes to their own compliance processes as the landscape evolves.”
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