Industry Divided Over Reeves' Consumer Duty Wholesale Review

The industry is divided over the Consumer Duty wholesale review proposed by UK Financial Conduct Authority chief executive Nikhil Rau. The review aims to ensure that financial firms prioritize consumers, but some fear it could lead to a "one-size-fits-all" approach. Industry experts are weighing in on the potential impact of the review on the financial sector.

The UK Financial Conduct Authority (FCA) has sparked division within the industry with its proposal to review the Consumer Duty, specifically focusing on wholesale firms. The review, led by FCA chief executive Nikhil Rau, aims to ensure that financial firms prioritize consumers. However, industry experts are concerned that the review could lead to a "one-size-fits-all" approach, diluting consumer protections [1].

Chancellor Rachel Reeves' directive for the FCA to review the impact of the Consumer Duty on wholesale firms has been welcomed but has also raised concerns. Reeves asked the FCA to address how the Duty applies to wholesale distribution chains that affect retail consumers, and to provide certainty around the classification of professional clients. The FCA is expected to test its proposals with market participants, consumer groups, and industry bodies before delivering its findings [1].

The proposed review comes amidst a broader regulatory overhaul unveiled by the government, which includes the Financial Services Growth and Competitiveness Strategy consultation. While the review aims to enhance consumer protection, some industry players fear that it could stifle innovation and increase compliance costs [1].

Meanwhile, the FCA has recently fined Barclays £42m for inadequate money laundering controls. The penalties relate to two cases involving WealthTek and Stunt & Co., where Barclays failed to conduct adequate checks and monitor risks effectively. This highlights the importance of robust financial crime controls, as poor controls can facilitate criminal activities and defraud consumers [2].

The industry's response to the Consumer Duty wholesale review remains mixed. While some welcome the FCA's efforts to strengthen consumer protections, others worry about the potential negative impacts on the financial sector. As the FCA proceeds with its review, the industry will be closely watching to see how the proposed changes will shape the future of financial services in the UK.

References:
[1] https://www.professionaladviser.com/news/4516503/return-us-size-fits-industry-divided-reeves-consumer-duty-wholesale-review
[2] https://www.banking-gateway.com/news/uk-fca-imposes-42m-fine-on-barclays-over-financial-crime-risk-failures/