In an effort to curb compliance costs and reduce regulatory burdens, the U.K.’s Financial Conduct Authority (FCA) is proposing to streamline the capital rules for investment firms.
The regulator has published a consultation paper that sets out its proposals for slashing the rules that determine firms’ regulatory capital requirements by approximately 70%.
According to the paper, released Thursday, the existing rules were modelled on the capital adequacy requirements for banks, which are needlessly complex for investment firms. Now, the FCA is proposing to cut large swaths of those rules and to simplify the parts that remain.
“The aim here is to make the rules around how firms hold their capital simpler for the vast majority of firms,” said Simon Walls, interim executive director of markets at the FCA, in a release.
“We want the revised framework to be proportionate, effective and aligned with the needs of investment firms while maintaining high standards of financial resilience and consumer protection,” he added.
The proposals wouldn’t change the amount of capital that firms are expected to hold to guard against periods of market stress, instead they aim to dramatically simplify the rules on what qualifies as regulatory capital.
The paper also proposes a more integrated approach to prudential regulation, which may be extended to other sectors of the financial industry in the future, it noted.
The FCA said that the proposals are part of its new effort to reduce needless regulatory burden and promote growth.
“Our proposals support the ambitions that we have set in our new strategy and in the commitments we made to the Prime Minister to streamline regulation and reduce regulatory burden while supporting the growth and competitiveness of the U.K.,” Walls said.
The deadline for comments on the paper is June 12.