In a recent address at Warwick Business School, Kate Collyer, Financial Conduct Authority (FCA)‘s chief economist, discussed stagnant productivity in the financial sector. She underscored the importance of risk rebalancing to spur innovation and growth.
Productivity in the financial sector has been stagnant for the past decade. Similarly, the UK’s economic growth has not met expectations since the financial crisis. Collyer stressed the need to understand and measure these trends to initiate necessary improvements.
Collyer believes the financial sector is crucial to the economy. Consequently, she advocates prioritising initiatives to boost productivity and economic growth. One such initiative she proposed is risk rebalancing to foster innovation and growth.
Rebalancing Risk to Stimulate Innovation and Growth
Risk rebalancing is not just about reducing risk. It’s about making informed, strategic decisions on where and how much risk to undertake. It’s about fostering an environment where businesses can innovate and seize new opportunities without fearing excessive regulatory backlash.
Regulators like the FCA play a pivotal role in this. They are tasked with supporting the financial sector’s growth and the broader economy by ensuring a balanced risk-taking environment. This includes crafting rules and regulations that protect consumers, maintain market integrity, and still allow businesses room to innovate and grow.
Collyer emphasised this balance’s importance, stating that excessive risk aversion can hinder innovation and growth. However, she also acknowledged that uncontrolled risk-taking can cause financial instability and crises. Thus, striking the right balance is crucial. A balance that promotes innovation and growth while ensuring financial stability.
In summary, Collyer’s speech at Warwick Business School highlighted the need for risk rebalancing in the financial sector. Achieving this balance can propel innovation and growth in the sector, contributing to the UK’s overall economic development.
