The Financial Conduct Authority (FCA) has announced plans to simplify the regulatory capital rules for investment firms, aiming to reduce red tape by 70%.
The UK regulator is seeking to streamline rules on the types of funds that investment firms must maintain to absorb losses and ensure financial stability during challenging periods.
Go deeper with GlobalData
While capital requirements themselves will remain unchanged, the FCA intends to streamline the rules on what qualifies as regulatory capital.
The current regulations, originally designed for banks, have been deemed overly complex and not suited to the operational models of investment firms.
The FCA’s proposal includes the removal of extensive sections that are irrelevant to most firms, alongside efforts to simplify remaining regulations.
“These changes would reduce the volume of legal text by 70%,” it said.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThe move is part of the FCA’s broader strategy to alleviate unnecessary burdens on firms, promote growth, and uphold the “competitiveness” of the UK’s financial services sector.
FCA interim executive director Simon Walls said: “We are always trying to be a smarter regulator, and part of that agenda is reducing unnecessary burdens on firms. The aim here is to make the rules around how firms hold their capital simpler for the vast majority of firms.
“We want the revised framework to be proportionate, effective, and aligned with the needs of investment firms while maintaining high standards of financial resilience and consumer protection.”
Additionally, the FCA plans to eliminate EU-derived regulations, making the rules clearer and more accessible. This is intended to reduce the time and resources firms expend on interpreting and applying regulatory requirements.
Importantly, the FCA has clarified that these measures will not alter the capital levels that firms are required to maintain, and no adjustments to capital arrangements are anticipated as a result of these proposals.
Last month, the FCA proposed regulatory changes for alternative asset managers to ease market entry, foster growth, boost competition, and stimulate innovation in the sector.
