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- Speech by Kate Collyer, FCA chief economist, at Warwick Business School, Financial Regulation in Support of the UK’s Growth. Delivered: 15 September 2025
Key points
- Smarter regulation is good for growth – we’re shifting our approach to risk, giving firms and consumers more space to innovate while still protecting markets.
- Risk has a role to play – appropriate risk-taking can boost productivity, competition and consumer outcomes, and we’re rebalancing regulation to support this.
- Practical reforms are underway – we’re opening investment opportunities, easing mortgage rules and reforming capital markets to support innovation and growth.
By Kate Collyer
I’d like to set out the FCA view of how we can best achieve the objective of growth underpinned by a dynamic, safe and sound financial system.
Everything the FCA does is about growth: fighting financial crime is important for growth; helping consumers is important for growth; promoting competition and keeping markets clean is important for growth.
But if we want to accelerate growth in the UK financial services sector and in the wider economy, then we need to change what we’re doing.
Today I’d like to talk about a key part of what we’re doing differently to support growth – how we’re opening up the public debate and rebalancing our approach to risk.
The problem
Productivity in our sector has stalled over the past decade and UK economic growth has disappointed since the financial crisis.
There are lots of ways to measure productivity. But if we look at the ten years since 2015, the annualised change in productivity was just 0.4 percent. That compared to 1.1percent across the whole economy over the same period. And multifactor productivity in the UK financial services sector is more or less the same today as it was in 2006, despite the huge technological change that has taken place since then. The first iPhone launched in 2007 and in financial services, we’ve gone from three days to make international payments to being able to complete transfers almost instantly. And that raises a challenge for regulators: could we do more to adapt our approach, and so better promote productivity and growth within our sector?
Risk is good
Appropriate risk-taking has an important role to play in both regulation and well-functioning markets, and it underpins economic activity and growth.
There are risks in not taking risks.
For consumers, the seemingly ‘safe’ option can mean missing out in the long run and can have life-changing consequences.
For markets and firms, risk-taking can lead to both efficiency and dynamism. And regulatory risk-taking affects how markets function and adapt to change, it affects competition and innovation and ultimately, economic growth and competitiveness.
So risk is good and is a critical feature of financial markets. What role can regulation play?
The solution
In our new strategy we set out our ‘rebalancing risk’ approach. This isn’t about accepting harm lightly or undermining our core objectives. It’s about equipping the FCA to make informed, balanced, risk-aware decisions that reflect the real-world complexity of regulating dynamic, modern markets, and to support our ambition to be a smarter, more adaptive regulator.
Let me say a bit more about the work we’re doing to support that for consumers, firms and markets and for our own regulatory risk.
Consumers
Let’s start with consumers.
Many people are not able to invest, but our research shows that 61 percent of adults with over £10,000 in investable assets held all or at least three-quarters in cash. Only 39 percent of adults held any investments at all. The Department for Work and Pensions (DWP) has said that 12.5 million people are under-saving for retirement.
We know that barriers to retail investment include risk appetite, consumer understanding, awareness, engagement, and search and attention costs. There is an ongoing debate as to which one dominates.
Demographics matter – men are more than one and a half times more likely to invest than women (43% v 28%) and our research has shown that nearly 80 percent of investors (on trading apps) were male.
Financial literacy also matters – research found that financial literacy scores increased with self-reported risk appetites. There are also ‘behavioural barriers’ with loss aversion, pessimism about returns and a lack of trust in financial institutions.
Addressing this is important for consumers and the economy – a recent Barclays reportLink is external identified £430 billion of ‘possible investments’ held in cash deposits after taking emergency savings of six months’ income into account.
We’re doing research on all of these – looking at the linkages between trust and engagement and building a better understanding the behavioural barriers to investment. And we’re making big changes to financial advice and guidance.
Turning to firms and that productivity challenge, we need to think about how to create incentives and institutional structures for firms to take considered, not excessive, risks. We often hear, in our AI work for example, that firms are worried about taking the plunge and a lack of knowledge is holding them back.
In our strategy, we said we will take an increasingly tech-positive approach – that means we are open-minded about tech and its ability to improve efficiency and productivity for firms and to improve access for consumers. We’ll allow space for firms to innovate without dictating solutions.
Our work on Open Finance is an opportunity for us to shape the way that new markets emerge and develop.
Our regulatory risk
Then finally, regulatory risk matters.
There are different types of risk and different types of regulatory risk – there are times when we face radical uncertainty, and the consequences of failure are catastrophic, those times require risk aversion. But quite a lot of what we do as a regulator is not in that space, and there may be opportunities within a ‘safety zone‘ where more risk could bring benefits without significant harm.
There are trade-offs when we make regulatory choices. This means we need to explore the relationships between the benefits we’re seeking and the potential harm that could be caused in pursuing those benefits.
We also need to use regulatory judgement to look at the distributional consequences. Who bears risk and how well-equipped they are to bear it is an important consideration.
We put that approach to practice in our recent CP on our targeted support proposals under the advice/guidance boundary review. I mentioned earlier that many people may be missing out on opportunities because they are holding lots of cash. Those missing investments affect the economy – not just missing capital for firms but the money in people’s pockets, now and when they come to retire.
We’ll finalise our rules by the end of the year. Our proposals for the provision of financial advice will help consumers make informed financial decisions and achieve better outcomes from their pensions and investments. We estimated the increase in wealth for consumers would be £732 million a year. We know that the rebalancing of risk may mean that whilst the majority may benefit, a small minority may not achieve the outcome for which they hoped.
Our recent changes to mortgage affordability criteria are another example. Current risk appetite may now be too cautious for the future in some areas. We expect the changes we’ve made to improve the efficiency of the mortgage market, to increase access to mortgages and subsequently widen home ownership and increase competition. All of that is important for productivity and for consumer well-being. But we weighed the risk of house price inflation and increased risk of arrears and repossessions, as well as the wider potential economic risks.
Those changes also highlight the need to think about the whole financial system and the whole economy. There are many factors – housing supply, social policy and wider economic conditions all impact affordable home ownership. Any changes to our rules are only one part of the story.
My final example is our approach to capital market reform. Last year, we set out a package of reforms to help strengthen the UK’s capital markets. They included the most significant changes to our listings regime in 40 years. Our aim is to support investors to make their own decisions on risk and where to invest – allowing them to take on more risks, while ensuring systems, markets, and information can be trusted.
All of these are examples of the FCA giving space for firms to innovate, to develop new products and solutions, to be more efficient and productive.
Evidence, evaluation and monitoring are critical tools as we make this shift. Our cost benefit analysis shapes policy design and informs trade-offs. Our AGBR policy was shaped by excellent economic research. And we need ongoing monitoring and formal evaluation to ensure we learn lessons and can adapt our approach and rebalance risk.
We’re developing metrics for our strategy and exploring how best to measure risk using metrics, looking at the individual policy or regulatory decisions and the system-wide perspective.
None of that is easy. Simple metrics may reflect many factors. For example, mortgage arrears rates reflect not only our affordability rules and lending practices, but also wider economic conditions. Many metrics may indicate harm with a time lag, creating a risk of harm in the intermediate period. And some risks, especially systemic risks, are harder to capture in this way. So we need to consider early warning signals and leading indicators, even for risks not directly within our control.
Last year, we launched a research competition, reflecting our commitment to deepen our understanding of how the UK financial services sector can drive economic growth. Risk was a central theme. One report suggested a methodology for quantifying contagion risk between firms, and we’re looking at how we might use that approach and others as part of our new risk approach.
Application to competitiveness
Turning to the headline topic of today’s conference – what does this mean for how financial regulation can/should support the aim of bringing more financial services business to the UK?
We know that growing our export markets and attracting inward investment is key to growth. We need to balance the risks that those businesses represent with the risk of missing the opportunity for the UK economy.
The investment management sector is a great example. It is a hugely important part of the UK economy and directly contributes to our economic growth. The UK is the largest centre for asset management in Europe and the second in the world. It is one of the main contributors to total UK financial services exports – 10 percent of global assets are managed here. That’s more than £11 billion in annual exports and nearly 7 percent of total UK net exports.
There are opportunities for the sector to grow. The question for the FCA is, how can we best rebalance risk to support that growth? There’s lots that we’re doing to address that.
We think there is room to better tailor the regime to UK markets, to improve proportionality and smooth the cliff edges that growing firms currently face.
We’ve recently published a call for input on how we might regulate to remove unnecessary rules and give firms more flex to compete with one another and to tailor the application of rules to firms based on their activities.
We’re looking at private markets, which can be an important way for investors to diversify and for corporates to get long term capital to finance growth.
We’ve launched our PISCES initiative to set up a new type of private stock market that will give investors more opportunities to buy stakes in growing companies.
Where we see opportunities from rebalancing risk we are driving hard and fast, with rigorous testing informed by evidence and analysis and focusing on how quickly we can support firms to get propositions to market.
In closing, we at the FCA are thinking more deeply about how we balance risk, building our knowledge and understanding to make informed decisions and looking to embrace approaches that unlock innovation and growth, while remaining vigilant to the real dangers that risk can bring.
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