Recently, FCA chief economist, Kate Collyer, addressed Warwick Business School. She discussed financial regulation’s role in fostering UK’s growth. She highlighted the financial sector’s stagnant productivity over the past decade and UK’s sluggish economic growth post-financial crisis.
Collyer suggested that this mediocre performance might hint at a deeper issue within the sector. She emphasized the need to reassess risk balance to spark innovation and growth. She raised concerns that the current risk management and regulation approach could be hindering the sector’s potential.
Moreover, she proposed that the sector’s conventional risk-averse attitude might be blocking necessary evolution and adaptation. In a rapidly changing economic environment, the ability to innovate and take measured risks is essential. She recommended a fresh balance between risk management and innovation promotion.
Rebalancing Risk: A Pathway to Growth
Collyer, the FCA’s chief economist, argued that effective regulation could foster, not hinder, growth. She suggested that financial institutions could stimulate economic growth by rebalancing risk. She emphasized the regulator’s primary role in creating an environment that encourages innovation while managing risks effectively.
She pointed out that the current regulatory environment is excessively focused on risk reduction, potentially at innovation’s expense. She championed a more balanced approach, weighing innovation’s potential benefits against possible risks. This approach could instil the needed flexibility and adaptability in the sector.
Collyer’s speech highlighted financial regulation’s vital role in promoting UK’s economic growth. Her call for a reevaluation of risk management practices could mark a significant shift towards a more innovative, dynamic financial sector. This is a wake-up call for regulators and financial institutions to champion growth and innovation in the sector.
