The FCA must be careful not to over-react to potential problems in the market, and should improve communications with firms.
The advice comes from the FCA Practitioner Panel, chaired by Nationwide boss Graham Beale.
The Panel has published the results of its survey of regulated firms, which also resulted in the recommendation that firms want clearer and more predictable regulation.
Over-reaction to possible problems was identified as a risk, with the possibility that the FCA could weaken consumer and industry confidence in financial products.
Beale said: “With the FCA only a month old, these survey results provide important feedback on the expectations of firms for the new regulator.
“The FCA needs to do more to allow competition to work in everyone’s best interests. It must improve the communications with industry so they better understand what is required. It should also be proportionate and predictable in its approach.
“If the FCA gets this right, there will be benefits for consumers and the economy as a whole, as well as for the financial services industry.
“The FCA has made a promising start. The Practitioner Panel looks forward to working with the new FCA. It is in all our interests to have effective financial services regulation in the UK.”
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