The Financial Conduct Authority (FCA) has announced plans to streamline the rules on the types of funds that investment firms must hold to absorb losses during periods of stress.

The regulator’s proposals would not change the rules about how much capital firms must hold but focus on consolidating the existing rules about what qualifies as regulatory capital.

Currently, the regulatory capital rules were designed for banks, which the FCA suggested makes them “complex” and “not tailored to investment firms’ business models”.

The regulator said there are large sections which are not relevant to most firms, and others it has made simpler.

The changes proposed today by the FCA would reduce the volume of legal text by 70%. This is part of the regulator’s work to make sure its rulebook works better for the UK market and to remove unnecessary burdens on firms, bolstering growth and investment.

It also forms part of the actions the FCA set out to support growth in its letter to the Prime Minster.

Interim executive director of markets, Simon Walls, said: “We are always trying to be a smarter regulator, and part of that agenda is reducing unnecessary burdens on firms. The aim here is to make the rules around how firms hold their capital simpler for the vast majority of firms.

“We want the revised framework to be proportionate, effective, and aligned with the needs of investment firms while maintaining high standards of financial resilience and consumer protection.

“Our proposals support the ambitions that we have set in our new strategy and in the commitments we made to the Prime Minister to streamline regulation and reduce regulatory burden while supporting the growth and competitiveness of the UK.”

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