Why we're doing it
We believe it is time to set out an updated approach to delivering our regime and operations.
The shift to a more principles-based approach to regulation complements our current risk-based and evidence-based approach. Risk-based regulation will remain central to determining how we prioritise our resources, as principles-based regulation steers our expectations of firms and the way we deal with you.
Past experience suggests that prescriptive standards have been unable to prevent misconduct. The ever-expanding rule books have not stopped further mis-selling, market misconduct or other detriment from happening but have become an increasing burden on resources. And small firms, who do not generally have access to deep compliance or legal assistance, have told us how bewildering it can be to navigate and understand a very prescriptive regime with thousands of detailed rules.
Financial markets are constantly changing. Continuous innovation and new product development are important ways in which the financial services industry generates benefits for consumers and markets. We believe regulation that focuses on outcomes rather than prescription is more likely to support this development and innovation. Any set of prescriptive rules is unable to address changing market circumstances and practices at all times, and it inevitably delays, and in some instances prevents innovation. In a quickly changing marketplace, principles are far more durable.
For these reasons, we believe that further enhancing our risk-based and evidence-based approach to regulation with an increased emphasis on principles and outcomes is not only the right but also the only way to progress our regulatory regime.