The House of Lords Financial Services Regulation Committee's report is a clear-eyed assessment of a problem the industry has known about for years.
The House of Lords Financial Services Regulation Committee's report, "Growing Pains: Clarity and Culture Change Required", does not mince words. Regulators are still operating with a post-2008 mindset: highly cautious, institutionally conservative, and structurally slow to accommodate the kind of innovation that the sector and the economy require.
The report's analysis of compliance costs is particularly pointed. Firms are facing what it terms 'mission creep': thousands of letters, hundreds of meetings, and a compliance burden that is not proportionate to the risk being managed. The resources diverted to managing regulatory process are resources not available for product development, market expansion, or client service. That is not a theoretical cost. It is visible in the decisions firms make about where to invest and where not to.
The overlap between the FCA, PRA, Financial Ombudsman Service, and Payment Systems Regulator creates a complexity that deters new market entrants and frustrates established firms in equal measure. Consumer Duty, introduced with laudable intent, has been implemented with insufficient clarity about what compliance actually requires in practice. The result is that firms are spending heavily on interpreting the regulation rather than on meeting the outcomes it was designed to achieve.
The comparison with Singapore's Monetary Authority is instructive. The MAS operates a 'concierge' model for firms seeking market entry or product approval: structured, time-limited, and outcome-focused. The FCA's approval processes are none of these things in their current form. This is not an argument for deregulation. Nobody serious is proposing that. It is an argument for proportionality and speed that is conspicuously absent from the current approach.
The committee's recommendations are sensible. Embed proportionality and growth-awareness into regulatory culture. Commission joint cost-of-compliance reviews. Publish clear guidance on Consumer Duty. Set timelines for executive and product authorisations. Align regulatory approach with international benchmarks.
What is less certain is whether the FCA and PRA have the institutional appetite for the cultural change these recommendations require. Regulatory cultures that have been built over fifteen years of post-crisis caution do not reform quickly. The firms and investors who would benefit most from the change the committee is calling for have heard similar arguments before. The test of this report is whether it produces different outcomes.