FCA Signals No Intention to Stop An End to Free Banking Model in UK

Nikhil Rathi, CEO of UK Financial Conduct Authority (FCA), hinted at a significant shift in the banking landscape, stating that the FCA would not stand in the way of moves to end Britain's free banking model if lenders opted to charge fees for holding accounts in order to offset rising regulation costs.

Rathi emphasized that the FCA's priority remains the protection of retail customers through its Consumer Duty rules, aiming to address concerns over increasing pressure on banking business models and margins.

In his prepared remarks for a speech on Thursday, Rathi underscored that the 'free-if-in-credit' banking model in the UK is a commercial decision, not a regulatory requirement, opening the door for fee-based approaches similar to those in other countries. Moreover, Rathi suggested that the application of the Consumer Duty could alleviate compensation levies on financial firms, indicating a pragmatic approach to enforcement that prioritizes addressing risks of harm while acknowledging firms' efforts to comply.

Meanwhile, Rathi reassured that the FCA is not inclined to immediately regulate advancements in artificial intelligence (AI) within financial services, signaling a cautious approach to technological innovation.

This stance comes amidst preparations by major British banks to cover potential redress linked to the FCA's ongoing probe, with estimated costs reaching as high as £2 billion. Rathi stressed the importance of firms' cooperation with data requests to expedite the regulatory process.

Source: Reuters