Nikhil Rathi stresses the need for open discussion on economic growth, acknowledging potential trade-offs and risks.
The drive for economic growth and innovation comes with trade-offs, including the risk that “one or two more things” could go wrong, Financial Conduct Authority (FCA) chief executive Nikhil Rathi has warned MPs.
Speaking before the Treasury Committee, Mr Rathi emphasised the need for a “good healthy debate” around the benefits and risks of growth, as the FCA published early proposals for potential regulatory simplifications.
Balancing growth with regulation
The UK Government has placed a strong focus on economic growth, urging regulators to work more efficiently. Addressing this, Mr Rathi assured MPs that the FCA’s approach remains anchored in its core objectives—consumer protection, market integrity, and competition—while also supporting growth and competitiveness.
“We entirely recognise that we play a role in different ways in supporting growth. But in all of this, what we want to do is have a good healthy debate about the risk and the trade-offs,” he said.
He acknowledged that while economic innovation and deregulation could unlock opportunities, they also increase the likelihood of issues arising, such as consumer harm, fraud, and insolvencies.
“We’re not going to be able to stop everything, but that might be a price worth paying for the broader benefits to society and the economy.”
Trade-offs in financial regulation
Responding to concerns that de-regulation could lead to increased consumer complaints and financial crime, Mr Rathi said it was important to have an “open, evidence-based debate” on the choices available.
Among the FCA’s proposed rule changes are plans to streamline mortgage lending criteria, simplify savings account communications, and review terms and conditions in credit advertising.
On mortgage regulations, Mr Rathi stated:
“We intend, subject to consultation, to enable more first-time buyers to come into homeownership. We can’t do that at the same time as saying there’ll be fewer defaults. There’s a choice there.”
Similarly, he suggested that some financial crime controls could be adjusted to support innovation, while acknowledging that this might lead to a slight increase in fraudulent activity.
“We can look at modifying some financial crime controls to be more proportionate, but in doing that, we can’t guarantee that one or two more money mules aren’t going to get through the system.”
Economic growth for whom?
When asked by the committee who ultimately benefits from economic growth, Mr Rathi responded:
“Ultimately, it’s for all of our citizens and businesses.”
However, he pointed to the UK’s widening productivity gap with the United States, which has more than doubled since 2012, impacting wealth generation and living standards.
He suggested that overly cautious regulatory approaches—particularly in pension fund investments—could be hindering long-term financial wellbeing.
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“You see that, for example, in terms of investment in pensions, where we perhaps have a lower-risk overall allocation of our enormous pension wealth, relative to what happens in the United States, Canada, Australia or other markets.”
This cautious investment approach, he argued, has contributed to the UK struggling to secure private capital for infrastructure and high-growth companies.
“We have to ask ourselves, is that really a sensible long-term solution for our society?”
A need for broader discussion
Mr Rathi concluded by welcoming the Treasury Committee’s scrutiny, noting that discussions about risk and trade-offs have often been overlooked.
“If we want to support innovation, growth, and generate these benefits, let’s have a debate about what the potential risks may be.”
His remarks suggest that the FCA is keen to strike a balance between regulatory safeguards and fostering economic expansion, while ensuring that risks are fully considered in the process.
As the UK Government pushes for greater regulatory flexibility, the coming months are likely to see further discussions on how best to achieve sustainable economic growth without compromising financial stability and consumer protection.
