Firms which prioritise staying within the rules rather than doing the right thing will not stand up to scrutiny for long, Financial Conduct Authority (FCA) chief executive Andrew Bailey has warned.
Speaking about the future of financial regulation, Bailey said regulated firms should be focusing on culture with principles and outcomes being more important to the regulator than rules.
He added that the regulator would continue to intervene in the financial services market where it saw fit.
And Bailey emphasised that he read all of the reports which were published by the regulator.
Prioritise doing the right thing
Delivering his speech at Bloomberg’s office in London, Bailey said that he supported economic growth and a strong and successful financial services industry, and wanted to enable both to happen.
But he also said that all of this needed to be done on a basis that is fair and sustainable to all groups in society, reflecting their different capacities and vulnerabilities.
He highlighted the roles of outcomes, principles and rules and how firms aimed to fulfil those objectives.
“I would put more emphasis on principles and outcomes, and recognise that rules are a means to deliver them, but not the only one,” he said.
“An organisation that prioritises being within the rules over doing the right thing, will not stand up to scrutiny for long. My aim is to see that mentality deeply embedded in the culture of firms.
“As the duty of care debate shows, there are strongly held views on consumer harm, and its incidence. The post-Brexit system cannot and should not seek to deny or ignore them,” he added.
Encourage sustainable risk taking
However, Bailey noted that it was essential to have a financial system which earned sustainable and acceptable returns transparently, and to encourage fair and sustainable risk taking.
“In these circumstances, there should be a debate about the future of regulation,” he continued.
“But, beyond that debate, it bears repeating that there’s a lot of common ground. We all want strong, open markets.
“We want our financial services to succeed. And we want sustainable growth as well as the innovation and progress that benefits the consumers we’re here to serve.”
‘I read everything’
Bailey also used his speech to explain that the regulator was attempting to reduce the amount of work it was publishing.
“I don’t need reminding of this because I read all the material before it goes out,” he said.
“When I came to the FCA I said I wanted to reduce this and I would still like to do so,” he continued, “but the central dilemma is how to manage the important demands of transparency and accountability.”