Growth and Accountability: A Legal and Regulatory Perspective on the FCA’s Secondary Objective

On 13 June 2025, two significant publications were released that collectively signal a pivotal moment in the evolution of UK financial services regulation. The House of Lords Financial Services Regulation Committee issued its second report, “Growing Pains: clarity and culture change required – an examination of the secondary international competitiveness and growth objective”, while the Financial Conduct Authority (FCA) responded with its own “Statement on the Financial Conduct Authority’s Commitment to Growth”. Together, these texts reflect the complex regulatory balancing act at the heart of the Financial Services and Markets Act 2023: promoting the UK’s growth and international competitiveness without compromising the FCA’s primary objectives of consumer protection, market integrity, and competition.

The Lords’ Diagnosis: Structural Tensions and Cultural Constraints

The House of Lords report delivers a characteristically measured yet critical analysis of how the FCA and PRA are approaching their new secondary objective. While recognising that regulators are still in the early stages of implementation, the Committee raises concerns about a lack of clarity in how the objective is being interpreted, prioritised, and operationalised. Key themes include:

Ambiguity of Purpose

The report highlights the absence of a clear, actionable definition of “international competitiveness and growth” and calls for greater precision in how success against this objective is to be measured.

Institutional Culture

Perhaps most strikingly, the Committee suggests that there is an embedded regulatory culture at the FCA and PRA that may not yet be sufficiently attuned to the new mandate. Regulatory caution, it argues, may be inhibiting a mindset that sees proportionate regulation as a facilitator, rather than a barrier, to innovation and investment.

Metrics and Accountability

The Committee underscores the need for improved transparency around how the regulators assess their own performance against the new objective. While recognising that outcomes may be hard to quantify in the short term, it warns against allowing the objective to remain aspirational rather than operational.

Engagement with Industry

The report encourages more meaningful engagement with firms and market participants to ensure that rule-making and supervision are informed by commercial realities, particularly for growth-oriented sectors such as fintech, green finance, and capital markets.

These concerns echo longstanding industry feedback. As UK Finance noted in its public response, “Clarity on the secondary objective is essential if the UK is to remain a magnet for investment. We support efforts to align supervisory practice with the broader economic mission.”

The FCA’s Response: Alignment and Reassurance

In parallel, the FCA’s statement asserts its commitment to supporting the UK's economic growth and competitiveness. Framed as a constructive response to the new statutory obligation, the statement outlines a number of initiatives intended to show that the regulator is embracing its expanded role. Key commitments include:

A “Mindset Shift”

The FCA acknowledges the importance of cultural evolution, noting that its internal strategy and supervisory approach are being updated to reflect the growth objective. This includes investment in training, data capabilities, and decision-making processes that better weigh economic impact.

As FCA CEO Nikhil Rathi remarked in a recent speech, “We must evolve beyond a box-ticking approach. Growth and consumer protection are not mutually exclusive—they are mutually reinforcing when underpinned by trust.”

Outcomes-Focused Approach

While stopping short of promising deregulatory measures, the FCA reiterates its commitment to proportionate, evidence-based regulation. It references its ongoing work to streamline the Handbook and its continued efforts to improve authorisations turnaround times and reduce regulatory friction.

Transparency and Metrics

The FCA indicates it will publish performance indicators related to the growth objective in its regular reporting. These will aim to capture both qualitative and quantitative impacts on innovation, investment flows, and UK market attractiveness.

International Positioning

The statement also reflects a growing awareness of the UK’s need to compete globally for capital, talent, and fintech leadership. The FCA points to its participation in global standard-setting bodies and its role in facilitating cross-border activity via frameworks such as the Digital Securities Sandbox.

The FCA’s message has found resonance in government circles. Speaking shortly after the publication of both documents, Economic Secretary to the Treasury Bim Afolami noted: “We expect our regulators to be ambitious for the UK. A competitive, forward-looking regulatory regime is not just desirable—it is essential for our global position.”

Global Context: A Competitive Jurisdictional Landscape

The UK is not alone in seeking to balance supervisory rigour with economic ambition. International comparators reveal differing models for embedding competitiveness into regulatory frameworks.

• Singapore’s Monetary Authority (MAS) explicitly integrates growth and innovation into its supervisory remit. MAS combines robust prudential oversight with an openly developmental stance—regularly coordinating with industry to attract cross-border capital and fintech firms.
• Hong Kong’s Securities and Futures Commission (SFC) operates under a statutory mandate to maintain Hong Kong’s position as a leading international financial centre, and tailors its approach accordingly—especially in areas like digital assets and green finance.
• The United States remains more fragmented, with agencies like the SEC and CFTC focused primarily on enforcement. However, recent Congressional proposals have floated the idea of integrating a competitiveness test into financial rulemaking, echoing debates familiar in the UK.
• The EU, while not operating with an explicit growth objective, continues to pursue capital markets integration through its Capital Markets Union initiative—effectively advancing competitiveness by legislative means.

The Lords’ concern that UK regulators may lag behind more strategically aligned jurisdictions is therefore not purely theoretical. Nor is the risk that firms might relocate capital or innovation to environments where growth and governance are more clearly aligned.

Reconciling the Two Narratives

Taken together, the Lords’ report and the FCA’s statement reflect a maturing dialogue around what it means to regulate for growth. The FCA is clearly attempting to demonstrate responsiveness, while the Lords maintain a sceptical but constructive oversight stance. However, several challenges remain:

Implementation Lag

Cultural and behavioural change within regulators is inherently slow-moving. While the FCA’s strategic alignment is promising, the translation of policy into day-to-day supervisory behaviour is less certain.

Measurement Complexity

There is no consensus yet on what a “growth-friendly” regulatory regime looks like, nor on which metrics will credibly demonstrate success. The Lords’ call for a defined set of KPIs could bring much-needed rigour.

Risk of Objective Dilution

As ever in financial services regulation, there is a risk of mandate overload. The FCA must ensure that its pursuit of growth does not dilute its primary objectives—especially in light of growing concerns about consumer harm and market stability in sectors such as crypto and high-risk investments.

Judicial and Parliamentary Oversight

The emerging framework must be subject to effective scrutiny. The Committee's insistence on enhanced accountability mechanisms is a timely reminder that independence must be coupled with transparency.

Conclusion: A Call for Coherent Reform

The new secondary objective represents a structural shift in UK regulation, but its success will depend less on legal drafting and more on regulatory philosophy, institutional behaviour, and consistent market engagement. As the regulatory ecosystem continues to evolve post-Brexit, this moment offers a rare opportunity to reshape the UK’s financial regulatory identity—not simply as a gatekeeper, but as an enabler of sustainable, globally competitive financial markets.

For firms, the message is clear: continue engaging with the FCA, participate in consultations, and be proactive in identifying how regulatory reform can support innovation and international reach. For the FCA, the task ahead is equally clear: to embed a genuine cultural alignment with growth while safeguarding the integrity of the financial system. Growth, after all, must be earned—not just mandated.