Speech by Kate Collyer, FCA chief economist, at Warwick Business School, Financial Regulation in Support of the UK’s Growth.
Productivity in our sector has stalled over the past decade and UK economic growth has disappointed since the financial crisis.There are lots of ways to measure productivity. But if we look at the ten years since 2015, the annualised change in productivity was just 0.4%. That compared to 1.1% across the whole economy over the same period.And multifactor productivity in the UK financial services sector is more or less the same today as it was in 2006, despite the huge technological change that has taken place since then. The first iPhone launched in 2007 and in financial services, we’ve gone from 3 days to make international payments to being able to complete transfers almost instantly.And that raises a challenge for regulators: could we do more to adapt our approach, and so better promote productivity and growth within our sector?Risk is goodAppropriate risk-taking has an important role to play in both regulation and well-functioning markets, and it underpins economic activity and growth.There are risks in not taking risks.For consumers, the seemingly ‘safe’ option can mean missing out in the long run and can have life-changing consequences.For markets and firms, risk-taking can lead to both efficiency and dynamism. And regulatory risk-taking affects how markets function and adapt to change, it affects competition and innovation and ultimately, economic growth and competitiveness.So risk is good and is a critical feature of financial markets. What role can regulation play?
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