At the Warwick Business School, Financial Conduct Authority (FCA) chief economist, Kate Collyer, recently discussed the decade-long productivity issue in the financial sector. She suggested that the UK’s economic growth has been lacklustre since the financial crisis. To address this, she proposed a rebalancing of risk to stimulate innovation and growth.
During her speech, Collyer shed light on different methods to gauge productivity and economic growth. She offered insights into the performance and challenges of the UK’s financial sector. This discussion was part of a broader discourse titled “Financial Regulation in Support of the UK’s Growth”.
Despite challenging economic conditions, Collyer expressed confidence in the sector’s potential for growth and innovation. She stressed that effectively managing and rebalancing risks could pave the way to a stronger financial sector. This approach could lead to increased productivity and, in turn, boost the UK’s economic growth.
Rebalancing Risk: A Key to Innovation and Growth
Collyer’s approach to rebalancing risk involves scrutinising regulatory frameworks and promoting innovation. She contended that various factors, including the regulatory environment, have hindered the financial sector’s productivity.
While regulations are crucial for maintaining trust and stability, they can sometimes suppress innovation and growth. The challenge lies in finding a balance. Collyer emphasised the need for a regulatory environment that ensures stability, promotes growth, and permits risk-taking—an essential part of innovation. However, it should also ensure effective risk management.
The FCA‘s goal in rebalancing risk is to encourage the development of innovative financial products and services. This could potentially enhance the productivity of the UK’s financial sector and fuel economic growth. However, striking the right balance between risk and innovation requires careful assessment and a nuanced approach.
Collyer’s speech underscored the need for adaptable regulatory frameworks. It highlighted the importance of fostering an environment that promotes innovation while maintaining the stability and credibility of the financial sector.
