The Financial Conduct Authority’s (FCA) chief economist, Kate Collyer, recently delivered a speech at Warwick Business School. The main thrust of her discourse was the need for a shift in risk balance to stimulate innovation and economic growth in the UK. The talk was part of the programme, “Financial Regulation in Support of the UK’s Growth”.
Collyer acknowledged that productivity within the financial sector has remained stagnant in the past decade. Furthermore, she noted that the UK’s economic growth has been below par since the financial crisis. These remarks underscore the pressing need for measures to enhance the sector’s efficiency and bolster the country’s economic performance.
While there are numerous ways to gauge productivity and economic growth, the FCA chief economist emphasised that the key lies in risk rebalancing. The intent is to foster a more conducive environment for innovation, which is a critical driver for economic growth. This approach is particularly crucial for the UK, given the underwhelming post-crisis economic performance.
Rebalancing risk to drive growth
For Collyer, rebalancing risk involves creating a regulatory framework that allows for measured risk-taking. This, in turn, could facilitate innovation within the financial sector. A more innovative financial sector is likely to be more productive, thus contributing to overall economic growth.
The FCA, as the sector’s regulatory body, has a pivotal role to play in this process. The authority can help in shaping policies and setting standards that encourage calculated risk-taking. Furthermore, it has the mandate to ensure that these risks do not jeopardise the sector’s stability and integrity.
While the task may seem daunting, the potential benefits are significant. Rebalancing risk could open up new opportunities for innovation and growth. It could also make the UK’s financial sector more resilient and adaptable to changing market conditions and trends.
In conclusion, Collyer’s speech highlights the need for a paradigm shift within the UK’s financial sector. Risk rebalancing, if managed properly, could prove to be the catalyst that revitalises the sector and helps drive the UK’s economic growth.
