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Regulators from the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and Bank of England (BoE) have been probed by members of the UK’s Treasury Select Committee on how they can ensure less well-off communities are not financially excluded.
As part of its inquiry into the Future of Financial Services post-Brexit, members of the UK’s parliament (MPs) have been probing regulators and policymakers on whether there are opportunities to simplify the financial regulatory system, and which changes to prioritise.
The Treasury Select Committee asked those supplying evidence about what role regulators can play in ensuring greater levels of financial inclusion. For example, how financial services and products can be accessible for a wide range of people, including low-income households, people living with mental health issues and people with disabilities.
“It is a serious issue. We try to go as far to the edge of our perimeter as we can in order to help, but some elements of this will require a coalition of a lot of people to tackle some of the issues,” acknowledged Sheldon Mills, executive director of consumers and competition at the FCA.
This was during a round of questions from Emma Hardy, a Labour MP, who asked: “Do you think that having regard to financial inclusion would help, accepting that you cannot make policy, if that was mandated by government?”
For this to be the case, it would be a significant step-change with the FCA’s current mandate, Mills explained. “One of the challenges would be what our relationship would be with firms in order to effectively ask them to use their funds, et cetera, to support potentially non-profitable activity,” he said, pointing out that regulators have to be honest about the challenge in some respects.
“Between that and where we are currently, I think there is an opportunity for the market to provide in a profitable way certain groups that they might not necessarily be serving,” he said.
For example, there is still more opportunity for firms to innovate and actively serve some of the groups that can fall victim to financial exclusion. “So we would like to foster the right environment for investors to come in and for firms to tackle some of these challenges and still effectively make a profit.”
Access to cash was another core issue that the MPs were keen to hear about. “You can say, 'Well, the ATM is only a mile away', but if you have no car and you are relying on public transport, how are you going to get to that ATM? That is why we need to really understand how different communities work,” Hardy cautioned.
In particular, Mills noted the work being undertaken by the Access To Cash review, which is being led by former Innovate Finance chair Natalie Ceeney.
“There are a lot of different approaches to that. One is the use of the post office. Another is the use of mobile things that go to people’s homes,” added Mills.
Getting cashback with purchases, or without a purchase, which the government is currently legislating for, is also an important part there. “I recognise the issues, but I think that the industry and the regulator are seized of a few of those and are trying to support people in relation to them.”
Rushanara Ali, another Labour MP, also raised the issue of access to cash, asking the regulators to provide analysis on the issue. “It would be really helpful to get an analysis that involves both the FCA and the PRA on market failures in relation to insurance, and in terms of access to cash,” she said.
“During the pandemic, we saw multiple banks close branches. In my case, in one ward a number of branches closed,” she pointed out. “If you could come back to us on what you have done across both institutions to address this that would be helpful because it keeps coming up in our constituency workload.”
