WEBVTT - Financial Conduct Authority CEO Nikhil Rathi Talks Financial Regulation

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>The UK Chancellor Rachel Reeves meeting with the Treasury Secretary

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<v Speaker 2>Scott Besson at the IMF as countries lineup to strike

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<v Speaker 2>trade deals with the United States. Corporates and regulators looking

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<v Speaker 2>for clarity as President Trump shifts the global economic landscape.

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<v Speaker 2>Joining us now to discuss Nicole Rathie, the CEO of

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<v Speaker 2>the Financial Conduct Authority, a financial watchdog which wallishes over

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<v Speaker 2>forty thousand businesses in the UK. Nicol Welcome to the

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<v Speaker 2>program sir, and sorry to miss you. You're up in

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<v Speaker 2>New York. We're down in Washington, d C. We cross

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<v Speaker 2>passed I think in the last forty eight hours. I

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<v Speaker 2>want to start with the nature of this shark and

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<v Speaker 2>what it means to you personally and for the institution

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<v Speaker 2>and ultimately for the UK. Nicole, this is a policy

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<v Speaker 2>shark across many dimensions. Does it have the potential to

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<v Speaker 2>morph into a financial shark as well?

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<v Speaker 1>Morning, Jonathan. What we've seen over the last few weeks

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<v Speaker 1>has been extraordinary volatility, record trading volumes in London. We

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<v Speaker 1>oversee a huge global financial center with asset classes ranging

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<v Speaker 1>from commodities, equities, fixed income and what you've seen is

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<v Speaker 1>actually the financial markets staying resilient you heard that from

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<v Speaker 1>aDNA just now, and coping with the changes in the

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<v Speaker 1>external environment and seeking to find the price. And that

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<v Speaker 1>is what we're focused on as regulators, making sure market

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<v Speaker 1>integrity is maintained and the markets are functioning and preventing

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<v Speaker 1>what you asked about, which is a policy shock turning

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<v Speaker 1>into a financial shock.

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<v Speaker 2>Nikko. One word we've heard repeatedly over the past few weeks,

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<v Speaker 2>and I'm sure you've heard the same word as orderly.

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<v Speaker 2>Things have been orderly. When I think of certain vulnerabilities

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<v Speaker 2>in the UK, my mind often shifts to the UK

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<v Speaker 2>housing market. What is the positioning of the housing market

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<v Speaker 2>at the moment? And you think now is a good

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<v Speaker 2>time to reconsider whether to lighten up some of the

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<v Speaker 2>stress tests on say, mortgage applications in the not too

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<v Speaker 2>distant future.

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<v Speaker 1>You're right, market conditions have been orderly, and I think

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<v Speaker 1>that's testament to all the work that's gone in over

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<v Speaker 1>of years on operational resilience, on liquidity, on capital and

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<v Speaker 1>on data and vigilance in the markets to make sure

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<v Speaker 1>that we do keep things orderly in these periods of

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<v Speaker 1>extraordinary volatility, and the same applies to the housing market.

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<v Speaker 1>We've seen a very significant shift in the interest rate

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<v Speaker 1>environment in the UK like in other countries around the

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<v Speaker 1>world over the last few years, but the housing market

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<v Speaker 1>has held up. Our repossessions are actually lower than pre

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<v Speaker 1>COVID and we're seeing continued resilience in consumer balance sheets,

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<v Speaker 1>and therefore we think it is appropriate for us have

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<v Speaker 1>a discussion in the UK about how we support first

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<v Speaker 1>time buyers access home ownership. A lot of people are

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<v Speaker 1>paying high rents in cities around the UK and that

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<v Speaker 1>isn't great for their long term financial well being, and

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<v Speaker 1>so that's why we've moved in that direction as part

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<v Speaker 1>of our overall push to support growth in the economy

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<v Speaker 1>in the UK, which is obviously an urgent need.

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<v Speaker 3>Nikkil there are two sides to this, and one, how

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<v Speaker 3>do you could say that the resilience of the global

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<v Speaker 3>financial system is the result of some of these regulations

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<v Speaker 3>and stress tests. On the other hand, you could say

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<v Speaker 3>that maybe some of these consumers don't have access to

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<v Speaker 3>maybe as easy credit because of how regulated some of

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<v Speaker 3>the financial institutions are. Are you pushing back against what

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<v Speaker 3>we're hearing globally in particular in the US, saying let's

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<v Speaker 3>remove some of the regulations that maybe are too stringent

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<v Speaker 3>on the financial sector.

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<v Speaker 1>We've had great conversations here in the US this week.

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<v Speaker 1>I had the pleasure of meeting Chair Atkins shortly after

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<v Speaker 1>he was sworn in, and I'm meeting a number of

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<v Speaker 1>my other US counterparts, and I think on the whole

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<v Speaker 1>agenda of growth, innovation, competitiveness, I think we're aligned. And

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<v Speaker 1>this conversation is happening in the US, it's happening in

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<v Speaker 1>the UK, it's happening in the European Union. We have

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<v Speaker 1>significantly improved standards of capital and liquidity. In the UK,

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<v Speaker 1>We've raised standards of consumer protection with our Consumer Duty

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<v Speaker 1>and it's right having done that to make sure that

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<v Speaker 1>the regulations are fit for purpose, for the needs of

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<v Speaker 1>the future and what the economy needs right now. And

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<v Speaker 1>I think we've we're moving very fast after putting around

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<v Speaker 1>fifty proposals to our Prime Minister at the start of

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<v Speaker 1>the year to implement those simplify our rules whilst maintaining

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<v Speaker 1>consumer protection and marked integrity.

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<v Speaker 3>Well, I guess another way to frame this is in

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<v Speaker 3>the years after two thousand and eight, there was a

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<v Speaker 3>steady march toward tightening financial restrictions on banks, and we've

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<v Speaker 3>seen as a result of that financial institutions lose businesses

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<v Speaker 3>to private ones and a whole host of other transformations.

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<v Speaker 3>Are we going to see some modicum of reversal of that?

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<v Speaker 3>Are we going to see going forward walking back of

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<v Speaker 3>some of the regulations around major financial institutions around the world,

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<v Speaker 3>not just in the United States, but also in the

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<v Speaker 3>UK and EU.

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<v Speaker 1>I think you will see a recalibration, and we're well

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<v Speaker 1>underway with some of our significant reforms in the UK

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<v Speaker 1>on capital markets. We've put through some of the most

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<v Speaker 1>far reaching reforms to our listing rules in the last

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<v Speaker 1>year or so. We're reforming the rules around prospectuses. We're

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<v Speaker 1>transforming the way advice is provided in the UK so

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<v Speaker 1>that our pension system is better able to provide capital,

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<v Speaker 1>infrastructure and scale up companies. We're also though a global

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<v Speaker 1>financial center, and we want to make sure that our

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<v Speaker 1>markets serve all needs. So I don't see this as

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<v Speaker 1>a opposition between banks and non banks. We want businesses

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<v Speaker 1>of all sizes to be accessing the capital they need,

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<v Speaker 1>equity or debt from public markets, from private markets, from banks,

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<v Speaker 1>and the important thing is to make sure that all

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<v Speaker 1>are well regulated and that we have the data we

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<v Speaker 1>need to monitor and make sure the risks are well managed.

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<v Speaker 4>Across multiple policies. Really, this White House Washington is setting

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<v Speaker 4>the gender for the rest of the world. Are you

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<v Speaker 4>concerned at all for race to the bottom when it

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<v Speaker 4>comes to deregulation.

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<v Speaker 1>That's not the message I was getting from my US

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<v Speaker 1>colleagues this week at all. There isn't an energy here

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<v Speaker 1>around regulatory reform, for example in the area of digital

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<v Speaker 1>assets and stable coins, but also a commitment to making

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<v Speaker 1>sure we have high standards of integrity. I think Chair

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<v Speaker 1>Atkins said and his statement when he was appointed that

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<v Speaker 1>he's committed to secure markets in the US. We have

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<v Speaker 1>a very deep relation relationship with our US capital market counterparts.

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<v Speaker 1>We share considerable amounts of data, and we work really

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<v Speaker 1>closely together on market developments on enforcement. So, for example,

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<v Speaker 1>in recent weeks, we've seen significant volatility in sovereign debt

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<v Speaker 1>markets and in bond markets. There's been a significant rise

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<v Speaker 1>in HEDGEMND participation in those markets. We're talking about those

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<v Speaker 1>issues and making sure we have a good mutual understanding.

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<v Speaker 4>You are the first head of the Authority to actually

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<v Speaker 4>get a second five year term. What do you hope

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<v Speaker 4>to achieve in the next five years.

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<v Speaker 1>Our Prime Minister has talked about rewiring the state in

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<v Speaker 1>the United Kingdom so that we are digitally enabled and

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<v Speaker 1>fit for purpose for the rapidly changing technological environment we

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<v Speaker 1>are living in. And I think that applies to regulators too,

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<v Speaker 1>And we have, obsee one of the world's largest financial centers.

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<v Speaker 1>We want to be open to business to participants from

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<v Speaker 1>all over the world. That's based on high standards, and

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<v Speaker 1>we want to move fast on embracing new technology too

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<v Speaker 1>and forging you know, deep deeper relationships with all of

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<v Speaker 1>our key trading partners. So I think you'll see us

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<v Speaker 1>moving very fast now on regulatory reform and seeking to

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<v Speaker 1>make sure that we are right at the cutting edge

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<v Speaker 1>of these new technological shifts.

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<v Speaker 2>Nickil, thanks for sharing some time with us this morning.

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<v Speaker 2>We appreciate it. A busy morning for you, I'm sure

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<v Speaker 2>in New York City. Nicol Rathi there, the CEO of

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<v Speaker 2>the Financial Conduct Authority