The FCA is introducing proposals to simplify the rules governing the types of funds investment firms must hold to ensure financial resilience during times of stress.

The Financial Conduct Authority (FCA) has unveiled plans to simplify and consolidate the rules defining regulatory capital for investment firms. While the proposals maintain the existing requirements for how much capital firms must hold, they aim to make the framework clearer and more accessible.

Currently, regulatory capital rules were designed with banks in mind, making them overly complex and not suited to the operational models of investment firms. The FCA intends to remove irrelevant sections—reducing the legal text by 70%—and streamline the rules that apply to most firms.

This initiative aligns with the FCA’s commitment to enhance its rulebook for the UK market, eliminate unnecessary burdens on firms, and foster growth and investment. It is a direct action taken in response to commitments outlined in the FCA’s letter to the Prime Minister, aimed at promoting the growth and competitiveness of the UK’s financial sector.

As part of this strategy, the FCA proposes removing outdated EU-derived rules, making them easier to interpret and apply. This will save firms both time and resources without requiring changes to their capital arrangements. Importantly, these measures uphold the current standards for financial resilience and consumer protection.