Speaking on the Fairer Finance podcast, released today, Rathi also hinted that the regulator had come under pressure from the Treasury to drop its naming-and-shaming approach to firms that have broken its rules.

Furthermore, he signalled a greater role for later life lending in the future of retirement planning.

Discussing the impact of the relaxation of rules that were restricting lenders’ ability to offer higher loan-to-income multiples, Rathi conceded that trade-offs were inevitable.

The changes have enabled borrowers to access an average of £30,000 of additional borrowing.

Rathi pointed out that the reforms have resulted in a huge increase in first-time buyers last year and he expects to see “tens of thousands and potentially hundreds of thousands” of borrowers benefitting over the course of parliament.

But he said: “Over the cycle, over an interest rate cycle, that might mean a modest amount of additional distress if interest rates rise significantly.

“You can’t do both, but there are benefits and there are costs of any policy shift.”

On the issue of publishing details of enforcement against firms, Rathi said: “The Treasury, I think, weren’t pretty secret about their view that they weren’t a big fan of transparency, about our actions when it came to firms.

“They were very persuaded by some of the lobbying they received on that topic.

“Nonetheless, we are stepping up the way in which we communicate through our enforcement watch.”

He also suggested equity release would play a greater role in the future, quoting Fairer Finance research that found over half the population will need to access housing wealth to get the living standards they expect in retirement.

Rathi said: “It’s not good for society that people are retiring with incomes that are insufficient for the living standards they expect.

“And they’ve got housing wealth that’s locked up that they could access.”

Fairer Finance managing director James Daley says: “ This was a remarkably candid interview, and credit to Nikhil for being so open about the pressures the FCA is under and the trade-offs they’re making.

“We are of course disappointed to see confirmation that the FCA is stepping back from tackling problems with new regulation.

“While the Consumer Duty provides a useful framework for the FCA to tackle poor conduct on a firm-by-firm basis, there are a number of wider market failures that won’t be addressed without new rules or much clearer guidance.

“Nikhil’s comments will also be hard reading for those who are campaigning to eliminate the poverty premium.

“While there are certainly some social policy issues where the FCA may need the Government to take the lead, there are a number of areas that are within the FCA’s remit to address.

“In particular, the credit card market continues to rely on unfair cross-subsidies which mean that the least financially resilient subsidise the better off.

“These business models arguably breach the FCA’s fair value rules – but it looks unlikely the FCA will address them in the current political climate.”

Listen to the full podcast interview on the Fairer Finance website or by searching for ‘Fairer Finance’ on major podcast apps.