Christopher Woolard, director of strategy and competition at the FCA, said it was crucial to support firms bring new ideas to market.
This morning, the regulator published plans for implementing a ‘regulatory sandbox’ as part of extending the FCA’s Project Innovate.
This will allow businesses to test out new, innovative financial products, services or business models without incurring all the normal regulatory consequences of engaging in those activities.
Project Innovate, which was launched a year ago, was developed by the FCA to foster competition and growth in financial services by supporting businesses that are developing new services that could genuinely benefit consumers.
Speaking at the Finance Asia Annual Compliance Summit in Hong Kong, Mr Woolard said: “Whilst regulators rightly focus on the risk of bad things happening in the system, we have to be conscious this can be at the cost of stifling the chance of good things emerging.
“We run the risk of seeing the problems and challenges of technology and innovation without valuing sufficiently the benefits they can bring. We may be potentially too risk averse.
“And the third danger is we ignore the needs of consumers and those firms that could bring the disruptive innovation we need in markets.
“As regulators we need to be conscious that ever more detailed regulation can often protect established firms from competition.”
However, he warned: “Of course the balance between innovation and risk is not easy to get right. We should not forget that Enron was voted the most innovative company in America six years in a row before its collapse.”
The FCA was asked to investigate the feasibility of developing a regulatory sandbox for financial services by the Treasury, following recommendations by the Government Office for Science.
Mr Woolard said: “To promote competition it is vital that we support firms – both regulated and unregulated, whether large incumbent or small start-ups – that want to bring new ideas that can benefit consumers to market. In just one year, Project Innovate has helped over 175 innovative businesses and undertaken a number of steps to address some of the challenges that firms face.
“To build on this work, today we’ve set out our plans to help firms test new ideas to better understand how they may work in practice.”
The FCA intends to open the sandbox unit to proposals from firms for testing in spring 2016.
Those who have views on the options and ideas for the sandbox are invited to participate in a sandbox event in December. Those who wish to provide input into the development of the sandbox unit can send it to This email address is being protected from spambots. You need JavaScript enabled to view it..