BUILDING OUR UNDERSTANDING OF THE MARKETS
This will be challenging for us because it means we will need to gather data and identify risks that are quite small – in terms of incidence and severity – such as where 10,000 customers have lost £300 each. It will mean an increased focus across the FCA – through our Authorisation, Supervision, Policy and Enforcement teams.
In practice, we will be more concerned about consumers – especially more vulnerable consumers – who might lose money or become further indebted, than about firms being able to continue in business (where the FSCS provides a safety net), except where the integrity of markets is threatened, or the firm represents a prudential risk. This will require us to develop a new, more sophisticated approach to monitoring emerging risks that could harm consumers, and capturing issues that affect consumers of basic products, as well as those buying more sophisticated products and services.
Research
We will conduct rigorous research into the risks in financial markets for both firms and consumers. We want to draw upon a wide pool of knowledge, research resources and opportunities to strengthen our knowledge and understanding of all segments of the market.
We will commission new areas of work from external experts and use a wide range of established and newer techniques, including behavioural insights to increase our ability to understand and respond to emerging issues and concerns. We will ensure research insights inform our policies so that they are based on a full understanding of market issues, including competition, consumer experiences, behaviour and market failures (see box on page 45 for more information).
Policy making
As an organisation we aim to set out a clear vision of what successful markets look like, then monitor markets and identify risks more effectively by improving our intelligence and research, and our understanding of why markets fail. Doing this will allow us to identify and prioritise the right interventions and remedies to fix the harm caused and control the risks – including making changes to our policy.
Our policies will set out our expectations of firms, focusing in particular on changing behaviour in financial markets. Our Board will agree our policies, and we will continue to consult on our rules and guidance before they are published in our Handbook.
Our policies will set out our expectations of firms, focusing in particular on changing behaviour in financial markets.
The Handbook
We will publish our core standards in a central handbook (or rulebook). Most provisions within the FSA’s Handbook will be incorporated into two new handbooks, one for the FCA and one for the PRA.
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