Regulation in the time of Covid: Part 3 (73) 28/4 - FCA Chair's speech (3): Outcomes

Starting on 16 March last year, I began writing daily blogs about the impact of the Covid crisis on financial regulation. Other issues, notably Brexit and digitisation, have featured as well but Covid remains the dominant driver of regulation as we enter 2021.

In Charles Randell's most important speech since last June, the FCA Chair last week set out how he thinks the FCA needs to change for the post pandemic world. This week I'll be covering its main themes.

Outcomes first stepped into the limelight as a chapter in the FSA's 2000 coming out document, "A new regulator for the new millennium" and for the next few years the regulator (including me) spent much time and effort defining outcomes and trying to track progress against them. The approach was updated around 2006 and the NAO in its various reviews of the FSA - against the Hampton principles and after the failure of Northern Rock - recognised the work done while noting it had been partially successful at best. When the FCA was formed, its commitment to outcomes was less serious but was still there in the rhetoric.

Charles Randell promises more information next month on the FCA's new approach to outcomes, and it's good that he recognises outcomes are hard to deliver. However, many of the core problems with defining and measuring outcomes may be insuperable in a regulatory context. Three of the biggest are: (1) the influence of the macro economy; (2) finding metrics that work, and; (3) the long-term nature of the effort required.

A quick example of each: (1) Ironically, due to the buoyant UK economy, the FSA's outcome measurement looked most positive in 2006, the year before the financial crisis broke; (2) A lot of effort was spent trying to define outcomes and metrics for the treating customers fairly initiative of the mid-2000s, but we ended up with the "TCF outcomes" which are really only process measures; (3) Outcomes for the Retail Distribution Review were defined in 2006, hew rules were implemented in 2012 and the first stage of the post implementation review was published in 2017.

We also publish a weekly regulatory update. If you found this interesting, sign up to receive it direct into your inbox.

We’ve developed a regulatory hub for financial services that we hope you will find useful. 

If you have a few minutes, I recently published an article looking at the regulatory top 10 themes for financial services.

And last but not least, you can watch the latest financial services regulatory update webinar, where David Morrey and I dissect what's really happening in regulation.