City firms should expect a “different relationship” with the Financial Conduct Authority (FCA) and fewer “detailed rules”, as the watchdog rows in behind the government’s drive for growth, its chief executive Nikhil Rathi has said.

In an interview with the Following the Rules podcast, the FCA boss warned the regulator was being forced to “rigorously” prioritise its resources and reshape its approach to company failures as ministers ramp up pressure on agencies to deliver growth.

The comments come as the Chancellor Rachel Reeves and Keir Starmer pile pressure on regulators to prioritise growth amid concerns red tape is hamstringing the economy. 

On Christmas Eve, Reeves wrote to 17 watchdogs demanding they set out plans to bolster the competitiveness of firms within their remit.

As part of the plans, she has said regulators need to tolerate more risk. However, Rathi has now twice challenged the government to quantify its appetite for corporate failure so the FCA can adapt its rules.

“We receive, for example, in the area of unauthorized business, thousands of cases reported to us of alleged unauthorised business every year. And we have to prioritise based on the potential harm we see [and] how proximate we think that harm is. We cannot realistically pursue all the intelligence in every case that crosses our desk,” Rathi told Following the Rules.

“Can we discuss metrics for tolerable failure within the system so that we can make decisions around resources as effectively as possible? And those are the types of conversation we need to have in the complex, very large financial service environment in which we operate.”