We have 6 independent statutory panels[1]. They represent the interests of consumers, regulated firms and markets and we are required to consult with them on the impact of our work, policies and practices. The Panels play an important role in both advising and challenging us. They bring a depth of experience, support and expertise that helps us identify and remedy potential harm to users and markets. We consider their views when we develop policy and implement interventions.
FCA Panels
The Panels play an important role in both advising and challenging us.
They represent the interests of consumers, regulated firms and markets.
About our response
Each statutory panel publishes its own Annual Report, which explains that Panels’ activities for the year and comments on our work.
In line with our statutory requirement, we have responded to the key representations made by the Panels in their 2023/24 Annual Reports. Our responses are grouped into 2 sections:
- themes raised by all or most of the Panels
- specific issues raised by individual Panels
We thank the Panels for their continued support. They have provided challenge and advice across multiple areas throughout 2023/24, including priority work on the Consumer Duty, Advice Guidance Boundary Review, and the Future Disclosure Framework. We have also welcomed positive feedback from the Panels on many areas of work. This has included our publications on financial crime, our work on listing reforms, the international capital markets conference and early engagement on our future strategy. We welcome the contribution of the newly established Cost Benefit Analysis Panel.
Common themes raised across the Panels
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Consumer Duty
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The Smaller Business Practitioner Panel, Practitioner Panel and the Consumer Panel encouraged us to be proportionate in implementing the Consumer Duty (the Duty). They encouraged us to progress work on the realised cost and benefits, provide clear guidance and examples of good and bad practice to support consistent interpretation and implementation, and focus on fair value.
Our response
The Duty came into force for all products on 31 July 2024 (when it also came into force for closed products and services). Its focus on consumer outcomes gives firms greater flexibility to innovate in the interests of consumers and better enables the regulatory regime to respond to market developments. We have continued to see firms act on its requirements and make changes to improve consumer outcomes. We have shared these good practices with industry.
The panels have given us insight into the way the duty has been implemented and some of the challenges firms have faced. For example, the SBPP has highlighted the issues smaller firms have when carrying out root cause analysis on complaints, given they are likely to have fewer complaints. SBPP suggested that smaller firms should be identifying other opportunities to capture insights, and this is reflected in the published findings[2] of our review into firms’ approaches to complaints and root cause analysis. We recognise firms in different sectors or of different sizes are affected differently by the Duty. We have focused on setting clear expectations through supervisory messages and publications on good and poor practice, such as in our multi-firm review of payments firms’ implementation of the Duty.
We have also focussed our communications with specific messages for smaller firms. For example, in our recent update on good and poor practice on fair value[3]. We continue to engage closely with the SBPP. Our approach to supervision supports this.
While supporting firms through the implementation of the Consumer Duty, we are also engaging proactively with firms where we see a problem. And we will act where necessary, such as in the GAP insurance market[4] and in the treatment of cash balances on investment platforms[5].
We have taken action to address the concerns of consumer organisations, including the Consumer Panel, and other stakeholders. For instance, issuing new guidance[6] on how firms and others should communicate financial promotions on social media in line with the Duty. Our work on fair value continues to focus on those areas where we see the greatest market wide concerns and where we can draw wider implications. Our work on cash savings is a good example of this.
Consistency in interpreting the Duty is important. We are working closely with the Financial Ombudsman Service and other members of the Wider Implications Framework[7], to identify and mitigate any emerging concerns that may have a wider impact across financial services. This includes sharing information on where complaints are arising and joining up our thinking on those areas of concern.
We estimated implementation costs of the Duty[8] before it came into force and indicated the scale of its likely benefits. We are committed to a post-implementation review of the Duty. We will start that once sufficient time has passed to allow a proper assessment of the costs and benefits. Our data strategy is designed to collect information that supports understanding of the impact of the Duty.
Now the Duty is in place, we want to simplify our requirements on firms and create greater opportunities for innovation. Our Call for Input[9] in July invited views on which of our Handbook requirements could be changed to foster greater competition and innovation, and contribute to growth. The Call for Input closed in July. We had over 170 responses and will be communicating our next steps in Q1 2025. We will continue to seek the Panels’ input to shape our approach.
Advice Guidance Boundary Review (AGBR)
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The Consumer Panel, Practitioner Panel and Smaller Business Practitioner Panel agreed on the importance of consumers having access to high-quality and affordable support and advice. But they gave differing feedback on our AGBR proposals aimed at achieving this.
Our response
We share the Panels’ view on the importance of our work to help consumers access the help, guidance and advice that they need, when they want it, at a cost they can afford, so they can make informed decisions about their finances. We want consumers to be offered a continuum of support. So, we will develop proposals to improve consumer outcomes at all stages of their financial lives.
We have undertaken consumer testing on consumer interest for targeted support on pensions. We are undertaking similar research on retail investments as well as accompanying quantitative research.
These insights will help us develop our thinking and policy on the advice guidance review, including:
- How we build in appropriate consumer protections.
- The extent to which we need prescriptive versus outcomes based regulation.
- How to make sure we provide room for innovation.
The Consumer Duty sets a high standard of care that firms must give to retail customers and we expect it to be at the core of any future regime.
We are working closely with the Ombudsman and the wider regulatory family in developing the regulatory framework. We will continue to engage closely with the Panels as this work develops.
Pensions Value for Money (VFM)
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The Listing Authority Advisory Panel emphasised that we should address finding the right level of consumer protection and a reset of risk appetite. They considered Defined Contribution (DC) pensions key to mobilising domestic investments to invest in more growth assets. While the Practitioner Panel and Smaller Business Practitioner Panel both encouraged us to make sure the VFM framework aligns with the wider AGBR work.
Our response
We have been working with the Department of Work and Pensions (DWP) and the Pensions Regulator (TPR) on a new VFM framework for defined contribution workplace pensions. Value for money is about long-term performance and service quality as well as costs and charges. A focus on value for money in this broader sense should encourage greater consideration of growth assets that, while higher risk, can offer significantly better returns and improve diversification. We consulted on detailed proposals[10] in August 2024 and are considering feedback as we develop and refine the framework.
We want a pensions system that provides good products with value for money, supports savers to make well informed decisions, and ensures confidence in pensions and consumer protection. The VFM framework aims to ensure the provision of good products with value for money, including for disengaged pension savers. The AGBR work will support savers to make well informed decisions.
We are working with other regulators to make sure that changes in the pensions regulatory framework are consistent, regardless of the type of scheme that is regulated and whether we or TPR are responsible.
Competitiveness and growth
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The Practitioner Panel emphasised that it is important for us to retain focus on operationalising the UK’s secondary international competitiveness and growth objective (SICGO). Alongside the Smaller Business Practitioner Panel, Markets Practitioner Panel and Listing Authority Advisory Panel they also encouraged us to build on and refine metrics to track progress against our new secondary objective.
Our response
We have already made a number of changes to support the new objective, by considering growth and competitiveness at every point in our decision-making processes and making it part of our forthcoming Strategy and will continue to embed these changes.
We have delivered several measures to support growth, from the overhaul of UK listing rules to the reform of UK retail disclosure rules; from changes to the remuneration regime with the PRA to new proposals to provide better value for money for workplace pension savers; as well as our newly launched AI lab to support innovators new AI models and solutions, to name but a few.
We have begun to publicly discuss[11] the risk appetite and trade-offs, particularly where society could tolerate more risk for greater growth opportunities in financial services. We are also deepening our understanding of how regulation supports competitiveness and growth, including the link between growth and financial inclusion.
We will continue examining our regulatory framework and processes with an eye to reducing unhelpful barriers and costs while complying with our objectives and other duties. We have launched a Call for Input[12] following the introduction of the Consumer Duty asking for feedback on areas of complexity, duplication, confusion, or over-prescription, which create regulatory costs with limited or no consumer benefit. We also want to include appropriate flexibility in our rules to be responsive to future changes and innovation. We are currently considering the responses to that Call for Input before we determine any future workplan. We are committed to working with other regulators, industry, the government and policymakers, to advance this work.
In line with the Panels’ recommendations, we will continue to consider whether additional growth and competitiveness-related metrics would be appropriate for measuring our performance against the secondary objective. These considerations will be key as we develop outcome metrics for our next Strategy, starting in March 2025.
Many of the secondary objective-related metrics published in July 2024 were published for the first time. We will use these as a base line to help us build on our success in the future. We agree our performance against the secondary objective should also take account of wider existing data sets, so far as they inform our regulatory competitiveness.
Environmental Social & Governance (ESG)
The Markets Practitioner Panel and Listing Authority Advisory Panel encouraged proactive collaboration to mitigate risks and enhance international coordination across jurisdictions. The Practitioner Panel, Smaller Business Practitioner Panel and Markets Practitioner Panel encouraged us to provide comprehensive Sustainable Disclosure Requirements (SDR) guidance, highlighting the regime’s benefits, ensuring clarity for advisers.
Our response
International Policy / International Sustainability Standards Board (ISSB)
We remain committed to consulting on amending our rules to move from the Taskforce on Climate-related Financial Disclosures (TCFD) aligned disclosure regime to the UK-endorsed ISSB Standards, known as UK Sustainability Reporting Standards (UK SRS). Following the updated timeline from the UK government for the ongoing UK endorsement process, we revised the timescales for our consultation in Primary Markets Bulletin 49[13]. Once the UK endorsement is completed in 2025, we will consult on amending our rules to move from TCFD to UK-endorsed ISSB disclosure standards.
We have encouraged companies to familiarise themselves with the ISSB Standards and consider reporting voluntarily against ISSB Standards before the conclusion of the UK endorsement process. We are working with the Government to ensure a coordinated implementation of UK SRS. To achieve this we are participating as observers at the Technical Advisory Committee (TAC) and as members of the Policy Implementation Committee (PIC).
We continue to engage with the ISSB, bilaterally and with our IOSCO partners. We co-chair the IOSCO workstream on sustainability reporting, under the Sustainable Finance Taskforce. This work includes influencing the ISSB’s next 2-year work plan and supporting a globally consistent approach to sustainability reporting using ISSB standards.
Sustainability Disclosure Requirements (SDR)
We are considering the consultation feedback[14] to make sure the regime protects consumers and takes account of any practical challenges for firms. We intend to publish a policy statement and further information about implementation in Q2 2025.
We are engaging with stakeholders to inform them about the SDR regime and promote the use of labels through webinars, roundtables, speeches, podcasts. We regularly answer firms’ queries via the SDR webpage[15].
We will be assessing and monitoring the expected outcomes and will conduct a post-implementation review in 3 years, as set out in our Policy Statement[16]. Advisers play an important role in this area but we recognise that not all advisers are comfortable talking to clients about sustainability. We felt that advisers need practical guidance and materials to help them support their clients in meeting their objectives. So, we asked industry to establish the Advisers’ Sustainability Group (ASG).
We look forward to the ASG’s guidance at the end of 2024. And we hope that the advice industry embraces this opportunity to raise standards. We asked industry experts to help raise the standards but FCA guidance and rulemaking remain part of our toolbox.
Artificial Intelligence (AI) regulation
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The Practitioner Panel and Markets Practitioner Panel were concerned with the current pace of establishing regulatory controls in contrast to the speed at which generative AI capabilities appeared to be emerging. They also emphasised the need to address existing disparities and to consider how to approach the emergence of future imbalances in Big Tech.
Our response
In April 2024, we published an AI update, which outlined our technology-agnostic, principles-based and outcomes focused approach to AI. Our focus is on how firms can use AI safely and responsibly, with a clear understanding of its impact on consumers and markets.
We have shared our approach to AI and our current approach to market monitoring with the Panels. The findings from the joint FCA and Bank of England AI survey[17] indicate that 17% of all AI use cases, as reported by surveyed firms, are foundation models, including Large Language Models (LLMs). Operations and IT are the areas with the largest number of such use cases, accounting for around 30% of all foundation model use cases.
Of the total number of use cases reported by respondent firms, 62% were rated as low materiality, 22% as medium and 16% as high. Low and medium materiality use cases were most common in operations and IT. High materiality use cases were most common in general insurance, risk and compliance, and retail banking.
A third of all AI use cases are third-party implementations. The top three third-party providers account for 73%, 44%, and 33% of all reported cloud, model, and data providers respectively.
The survey notes that AI can simultaneously increase cyber risks and help mitigate them.
We have published research into biases[18] that may arise in certain machine learning models used to make predictions or help in decision-making about consumers. This work is aligned with the DRCF’s work on AI fairness[19] and also contributes to the broader debate on AI bias. For example, the Consumer Panel’s publication on Potential bias in firms' use of consumer data[20].
Big Tech regulation
The Consumer Panel and Smaller Business Practitioner Panel were concerned that the lack of regulation in this area could present risk of harm from potential price discrimination, competition and data privacy issues.
Our response
We launched a Call for Input[21] (CFI) to examine data asymmetry and sharing mechanisms between Big Tech firms and financial services firms. This aimed to assess potential adverse implications for how competition develops in financial services leading to poor consumer outcomes in the future. We have published a Feedback Statement[22] with the outcome.
The CFI did not identify significant current effects but highlighted potential future issues that could adversely affect how competition evolves in retail financial markets, leading to poor consumer outcomes.
The value of Big Tech data in financial services is uncertain. We agreed with CFI respondents that future potential harms could impact competition and harm consumers, while untapped benefits may exist. There are likely to be potential ‘use cases’ for Big Tech data in areas like consumer credit and insurance. In these areas risk-based pricing can be informed by consumer behaviour and use cases in the personalised marketing of financial services. However, the value of that data in financial services is still unclear, raising concerns that opportunities for consumer benefit could be missed. To explore these, we propose using our Digital Sandbox.
If Big Tech firms’ data is valuable in financial services, we will examine, through regulation, how firms’ incentives (including Big Tech firms) can be aligned to share data to achieve good consumer outcomes.
We also considered the feedback on whether digital wallets should fall within our regulatory perimeter and launched a Call for Information[23] with the PSR in July 2024. This will inform our review of the Payment Services Regulations as we undertake the repeal and replacement of EU law.
We considered the feedback about extending our analysis to wholesale markets. We found that Big Tech firms are unlikely to be able to work with wholesale firms to directly compete in wholesale markets due to strict privacy agreements. The Wholesale Data Market Study[24] found little evidence of Big Tech firms entering wholesale markets to directly compete with incumbents. However, we will continue monitoring wholesale market activities.
This section identifies and responds to some of the issues raised by individual Panels. We have not responded to every issue [including issues raised by the Panels in response to our consultations]. Instead, we have responded to those issues we consider important to the Panels and those they represent.
Financial Services Consumer Panel
Financial Services Consumer Panel logo
Financial Services Consumer Panel Annual Report 2023/24 (PDF)[25]
General Insurance
The Panel is concerned that loaded premiums, used to generate commissions, do not offer fair value to consumers. They are also concerned about consumer confusion as to whether they have received regulated advice when buying insurance products online.
Our response
Loaded premiums
Loading premiums solely to generate commissions that are not otherwise fair and reasonably justifiable is contrary to our rules. We are looking into the practice more broadly. We want to see how insurers may be currently seeking to justify their approach, especially in relation to our ongoing market study into protection insurance.
Regulated advice
General insurance firms must provide customers with information about their status. This includes whether they are giving a personal recommendation and, if so, the basis for it. Firms are also under a general obligation to make sure their communications are clear, fair, and not misleading. Although our rules don’t prescribe a particular format, for online firms for instance, this information must be provided in good time before the contract is concluded. Providing a personal recommendation and advice are subject to FCA regulatory requirements.
Primary consumer protection objective
The Panel expressed concern that our primary consumer objective must not be diluted or weakened in the pursuit of our secondary international competitiveness and growth objective (SICGO).
Our response
Our SICGO objective only applies when advancing our primary objectives, it cannot be advanced on its own.
Our primary and secondary objectives are not mutually exclusive. We need stable markets to grow sustainably. And consumers need to be able to trust that financial services will deliver good value or effective competition to raise quality, drive down prices and prompt innovation.
Practitioner Panel
Access to Cash
The Panel encouraged us to establish the right incentives to drive changes that lead to good consumer outcomes.
Our response
Our new access to cash rules, which we introduced after Parliament tasked us with ensuring reasonable access to cash, came into force on 18 September 2024. They require firms designated by the Treasury to assess and fill gaps, or potential gaps, in cash access that significantly impact consumers and businesses.
Our rules are intended to be proportionate, and flexible enough to adapt to demand. We carried out a cost benefit analysis and consider the costs are proportionate. We consider they are outweighed by the benefits to those consumers and businesses who rely on cash and will continue to have reasonable access to it as a result of our rules. Our rules don't prescribe the type of facility designated firms must provide to deliver required cash access services, and we encourage firms to consider how innovative solutions could meet consumer and business needs in a cost-effective way.
The new regime only applies to entities designated by Treasury. But we expect all firms to consider how they can deliver good consumer outcomes when withdrawing services, in line with the Consumer Duty and where relevant, our guidance[27] on branch and ATM closures and conversions.
Strategic prioritisation
The Panel urged us to focus on realistic reform, considering constraints and be prepared to deprioritise work as necessary.
Our response
From April 2025, we will be focusing on 4 priorities, down from 13 in our current Strategy.
During our annual business planning process, proposed plans undergo a robust prioritisation and deprioritisation exercise to make sure that we are effectively focusing our efforts. As we move to our new strategic themes, we are carefully mapping and reviewing existing projects and programmes to make sure that any trade-offs and decisions for deprioritisation have been fully assessed.
Prioritising our work and fully understanding the impacts allows us to make resilient and effective plans, while enabling firms to do the same.
We will continue to engage with all the Panels’ in the coming months on our strategy and business planning and look forward to their feedback.
Critical third parties (CTPs)
The Panel encouraged us to align critical third parties rules with other jurisdictions.
Our response
Our policy paper[28] explained that we believe the regime will advance the SICGO objective, by contributing to a more stable financial system, which is in turn more likely to promote growth and competitiveness in the UK economy.
We share the Panel’s view that we need to avoid inhibiting competition and innovation and align with other jurisdictions to find shared solutions. In our cost benefit analysis accompanying our Consultation Paper, we evaluated the potential risk that the regime could exacerbate concentration in the third party market. We explained how elements of the regime may offset, counteract, or prevent this from happening. As the regime is aligned to similar ones operated or in development by peer regulators, the effect may be further diminished. We clarified in our Policy Statement that designating a CTP does not mean it is more resilient or more suitable for a firm. We also included rules preventing a CTP from using designation or oversight as a mark of regulatory endorsement.
We recognise the global footprint of some potential CTPs and industry feedback on this. So we have sought to align our regime with international standards and to be as interoperable as reasonably practicable with similar existing and future regimes. For example, the EU’s Digital Operational Resilience Act (DORA) and the US’s Bank Service Company Act. We are working with international partners bilaterally and via international standard setters to achieve this.
Listing Authority Advisory Panel
New regulations and consultations
The Panel shared concern that the volume of new regulations and consultations could impact the attractiveness, effectiveness, and international competitiveness of UK capital markets.
Our response
There have been a significant number of reform initiatives. Many of these are subject to the statutory obligation to consult by regulatory agencies and government.
We are committed to being transparent and efficient in that consultation process. This includes publishing the regulatory initiatives grid (RIG),[30] speeches and other communications and providing a coherent vision for FCA wholesale market reforms.
We also recognise the need to act at pace. During the recent UK Listing Rule reforms we took an innovative approach. This included a consultation without rules, use of senior speeches and our convening power to set direction and gauge reaction to proposals, issuing draft rules in two tranches following a further consultation, and engaging existing issuers on implementation before finalising rules.
Markets Practitioner Panel
Proposed approach to enforcement
The Panel highlighted industry concerns about our proposed approach to enforcement.
Our response
In February 2024, we announced proposals[32] to provide a measured increase in transparency about our investigations. This formed part of our new enforcement approach. Our intention to conduct fewer investigations faster, increasing the deterrent impact of our work, was widely welcomed.
We are listening carefully to feedback on, and concerns about, our proposal for a greater measure of transparency on our investigations. We will continue to engage with wide range of stakeholders, including firms, trade associations, consumer groups and the Panels, before making any final decisions.
To support further engagement, we published[33] greater detail on how increased transparency could work in practice. This included clarity on any new public interest test, practical issues, and data on the potential impact. It reflected the feedback we got during our extensive stakeholder engagement. We aim to reach a decision on these proposals by the end of Q1 2025.
Macroeconomic and geopolitical environment
The Panel emphasised the need for close and continuous monitoring of markets, as sectors remain vulnerable to economic uncertainties.
Our response
We remain vigilant to macroeconomic and geopolitical risks. This includes their potential impact both on regulated firms and on the broader functioning of wholesale markets. We seek to monitor emerging risks and address crystallised risks at pace should they arise. Where appropriate, we heighten our analysis and monitoring of particular asset classes or products that are exposed to key economic trends, variables and uncertainties. Many risks in wholesale markets have cross-border dimensions. So, we use international collaborative arrangements and fora in our horizon-scanning. Our CEO, Nikhil Rathi, is currently the co-chair of the Financial Stability Engagement Group of IOSCO, where emerging risks and potential assessment of these are discussed.
Smaller Business Practitioner Panel
Smaller Business Practitioner Panel logo
Smaller Business Practitioner Panel Annual Report 2023/24 (PDF)[34]
Proportionality of data requests
The Panel has emphasised the importance of a robust cost benefit analysis for data requests of firms.
Our response
We are mindful of the impact of data requests on firms. And we continue to strengthen our controls in response to findings from the 2023/24 FCA and Practitioner Panel Survey[35] and feedback from firms.
The joint FCA and Bank of England Transforming Data Collection programme is designed to improve our data collections. It involves more industry engagement in the design and testing of new collections to make sure the value we receive from the data is proportionate to the burden placed on firms. The Panel saw from the My FCA demonstration that we are simplifying the regulatory reporting submission process. Our aim is to make submitting data easier and faster for all firms, with particular benefit to smaller firms who use our systems infrequently. The My FCA demonstration included single sign-on capability (with multi-factor authentication), leading to a landing page with a personalised list of regulatory activities required (across our RegData and CONNECT systems), details of upcoming tasks and overdue items, messages and announcements, and links to firm records on the Register, Regulation Round Up and the Handbook.
When we introduce a new rule, we undertake a cost benefit analysis (CBA) to assess the costs and benefits a policy is expected to generate. It describes and quantifies, as far as possible and proportionate, the likely impacts of a policy. It compares benefits against costs and shows who we expect will benefit and who will bear the costs.
The CBA Panel is a new independent panel of experts to advise us on the CBA. The Rule Review Framework sets out how we monitor and measure the effectiveness of new rules and how we conduct a review if required.
The Consumer Finance Product Sales Data reporting[36] will impose some additional requirements on firms. We consulted widely on our proposals and concluded that these additional requirements are proportionate to the benefits. The data will enable us to quickly identify and deal with harm in the consumer credit market. It will also allow us to significantly reduce the number of ad hoc information requests we make, which can be costly and inconvenient for firms by virtue of their unpredictability. We will continue to make ad hoc requests across the markets we regulate. But we recognise from firms’ feedback that we can do more to explain why we are requesting data/information, how we will use it and to better manage expectations on when firms can expect feedback.
Sustainability of advice sector
The Panel is concerned about the sustainability of smaller firms and the advice sector. It highlighted the need for proportionate regulatory requirements and greater attention to economic and regulatory pressures that compromise firms’ sustainability.
Our response
Smaller advice firms play a vital role in providing access to advice and ensuring good consumer outcomes.
In September, we updated the Panel on our strategy and the actions we are taking to promote sustainability across the sector, as detailed in our Portfolio Strategy letter[37]. These actions include:
- Increased industry engagement and commitment to strategic collaboration as outlined in our speech ‘It’s good to be different[38]’. This aims to gain greater insights into the challenges facing firms and shape our future regulatory proposals.
- An increasingly forward-looking and data-led approach. This includes gaining greater insights into the sector’s current position, its sustainability, and how it is likely to change.
- Taking a more outcomes focused approach following the introduction of the Consumer Duty and simplifying our rules where we can, as set out in our Call for Input[13].
- Work to make sure the ‘polluter pays’. We expect this will help lower FSCS levy costs over the longer term sustainably.