The Financial Conduct Authority has set out changes it hopes will streamline rules for investment firms and cut red tape by 70 per cent.
It is proposing to streamline the rules on the types of funds investment firms must hold to absorb losses and maintain financial resilience during periods of stress.
The regulator is not proposing to change how much capital firms must hold but simplify the rules for what qualifies as regulatory capital.
It said a “key improvement” would be removing provisions aimed at banks which do not reflect the business models of investment firms and that the proposed changes would “reduce the volume of legal text by 70 per cent”.
Simon Walls, interim executive director of markets, 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.”
The FCA wants to remove all references to the UK Capital Requirements Regulation (UK CRR) from the definition of regulatory capital, also known as ‘own funds’.
It said this would lower compliance costs and make the framework easier to follow.
Current rules about the capital firms must hold for periods of stress were designed for banks. The FCA said this means there are large sections which are not relevant to the vast majority of firms.
Walls added: “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.
“Our proposals support the ambitions that we have set in our new strategy and in the commitments we made to the Prime Minister to streamline regulation and reduce regulatory burden while supporting the growth and competitiveness of the UK.”
The regulator said the proposals are part of wider plans to support growth, including the removal of EU-derived rules to make them clearer and more accessible.
The regulator is now consulting on the plans and is asking for comments by June 12.
Earlier this month, the FCA launched a second consultation on “simplified” cost disclosures for consumer composite investments.
tara.o’connor@ft.com
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