Regulation Watch is a resource aimed at providing our members with updates on the activity of the sector's regulators, highlighting areas of specific interest.
Ideas and institutions: a growth story: Andy Haldane argues that the economy is undergoing a ‘Fourth Industrial Revolution’. He notes that raising levels of skills and training for workers is one way of limiting the costs of technological disruption.
Payments after PSD2: evolution or revolution: Karen McTeague, FCA Director of Retail Banking Supervision, talks about the oppounrtities created by PSD 2 and Open Banking, and in particular to remember it is an opportunity to demonstrate trustworthiness to customers.
Five years of macro-prudential regulation: Alex Brazier, Executive Director FSSR at the Bank of England, looks back at the creation of the Financial Conduct Authority, Prudential Regulation Authority and Finance Policy Committee and considers the challenges for the future including Brexit, household lending and the unbundling of banking services.
Transforming culture in financial services: speech by Andrew Bailey, FCA Chief Executive, in which he reflects on culture within the sector, the regulator's role and expectations, and the importance of positive culture and diversity.
Ethics and Trust in Finance: a simple but effective recap on the importance of ethics and culture in our sector given by the Governor of the Bank of France.
Regulatory Priorities for Retail Banking: a thought provoking speech by Katrina McTeague, FCA Director of Retail Banking Supervision in which she discusses the need for increased competition and how this will benefit consumers.
RoboAdvice - an FCA perspective: A useful overview of the FCA's current line of thinking on Robo Advice given by Bob Ferguson, Head of Department, Strategy & Competition Division.
Fair and Effective Markets Review [FEMR] Progress update: The Treasury, FCA and PRA have released a joint summary of progress against the recommendation of the final FEMR report. Having noted the lack of reference to professionalism as well as a focus on standards at the firm, and not individual actor level, we are preparing a response highlighting our work supporting the recommendation to ‘raise standards, professionalism and accountability of individuals’.
The Financial Conduct Authority (FCA) has annouced new proposals designed to protect consumers who use overdrafts and high cost credit. With regard to overdrafts the proposals include mandatory rules to make it easier for customers to manage their accounts, including; mobile alerts warning of potential overdraft charges and stopping the inclusion of overdrafts in the term 'available funds'.
Mortgages:The FCA has published its interim report into the mortgage market. The report found that competition in the mortgage market is working well for many people. Recommendations include: that it be easier for consumers to find the right mortgage; there should be a wider range of tools providing consumers with a choice about the support (including advice) that they receive; that consumers choosing an intermediary should be able to do so on an informed basis; and that consumers should be able to switch more freely to new deals without undue barriers.
The Financial Stability Board [FSB] has set out its toolkit for Strengthening Governance frameworks to Mitigate Misconduct Risk. It sets out 19 steps that regulators and firms can take to tackle the causes and consequences of misconduct. Tool 8 notes that ‘Individuals are subject to professional standards of competence and conduct in the discharge of their duties’.
FCA Business Plan 2018/19: For retail banking the focus will remain on culture. Findings from the strategic review of banking business models will inform a consultation paper later this year. There will be a consultation on the FCA register, as well as a discussion paper on introducing a Duty of Care. The implementation of Open Banking and PSD 2 will be closer monitored. Please keep checking as we will prepare a brief summary of the plan soon.
PRA Business Plan 2018/19: Brexit and Ring-Fencing are high on the list of priorities, with further focus on operational resilience. The PRA also predicts around 20-30 new banks will enter the market in the next 2-3 years based on the current activity of the New Start-Up unit.
FCA Discussion Paper on Transforming Culture in Financial Services: a series of 28 essays which discuss what a good culture might look like, the role of regulation and regulators, how firms might go beyond incentives, and how to change behaviour for the better. We have raised our disappointment directly with FCA CEO Andrew Bailey that there is no reflection of the role of professionalism within this discussion. Output from the event can be found on the FCA website.
FCA Retail Banking Product Governance Review: This examined how well banks consider customers’ needs when designing and selling products and in the provision of after sales services. Whilst the review found many positives, there remain concerns about banks abilities to test customer understanding and reminded firms about the Parliamentary Commission on banking Standards recommendations in this area.
Easy Guide to Banking: The FCA have published an easy guide to banking, specifically designed to help those with autism [published to coincide with World Autism Awareness Week which ran 26/3-2/4.] The FCA's intention is to raise awareness of the issues some autistic people face when accessing financial services.
BSB Annual Review: The second annual Assessment of BSB’s member firms showed improvements in employees’ perceptions of their senior leaders, being treated with respect, and their sense of shared purpose. By business area, improvements in employee perceptions were most evident in Retail and Commercial Banking. You can read it here.
BSB’s Principles for Strengthening Professionalism in Banking: Output from the BSB’s year-long project to explore ways of strengthening professionalism in the UK banking sector for the benefit of employees, customers, clients and wider society. CB:PSB and Institute colleagues actively participated in this project which can be found here.
FCA Future Approach to ... : In line with its Mission, the FCA has published to further 'Approach' documents. The final two papers cover Enforcement, which outlines how the FCA conducts investigations and its powers. It shows how enforcement sets out to achieve fair and just outcomes in response to misconduct and to ensure FCA rules and requirements are obeyed, in a way which ensures investigations are conducted in a consistent and open-minded way to get the right outcomes; and Supervision which shows how the FCA aims to be more forward-looking and pre-emptive in its supervision of firms. It outlines proactive engagement with firms, with a focus on business models and the drivers of behaviour in firms. It also explains how the FCA uses an intelligence-driven and data-led approach to enable it to take prompt action once harm has been identified. Feedback is requested by 21st June.
This completes the series which covers: the FCA Approach to Consumers, Authorisation, and Competition. We submitted a Chartered Body Alliance response to the Approach to Consumers, stressing our shared belief that good outcomes for consumers will be achieved, at least in part, through ongoing support for initiatives to increase and strengthen professionalism in the sector, and again challenge the FCA to consider professionalism as a suitable metric in assessing consumer confidence.
Open Banking effective 13th January 2018: As you may recall, in August 2016 the Competition and Markets Authority published its final report on its retail banking investigation. A key remedy resulting from this was for the UK's nine largest account providers to make, with customer consent, key data available to authorised third parties. On 13th January, this requirement came into effect. However, five of the banks have been granted until March 2018 to meet the requirement. Deatils about the launch of Open Banking can be found on the Open Banking Implementation Entity's website. The timing of this coincides with those coming into effect under the Second Payment Services Directive [PSD2]. A useful guide to the difference can be found on the Payments UK website [in 2017 Payments UK became part of the new trade association UK Finance.
Senior Manager & Certification Regime (SMCR): Further consultation papers were published in December 2017 with proposals for the practicalities of extending the SMCR to all FS regulated firms [CP17/40] . An additional paper outlined propsals to extend the Duty of Responsibility rules [CP17/42]. Our responses are available here.
The PRA published consultation CP28/17. Amongst other proposals, it set out plans to amend gender references in its documents including the removal of the term 'grandfathering' which will be replaced by 'conversion'. This work is now being completed.
Information About Current Account Services: The FCA was tasked with investigating and implementing additional information following the CMA Retail Banking Market investigation which reported in Autumn 2016. CP17/24 proposed a number of metrics designed to help consumers form meaningful comparisons between providers but none which highlighted committment to a cultue of professionalism. Our response challenged the FCA on this point and can be read here. Although some amendments to the proposals have been made, it was made clear in the Policy Statement [PS17/26], released in Decmeber 2017, that no additional metrics would be added at this stage. We will continue to argue the case in this matter at all relevant opportunities.
Financial Advice Market Review [FAMR]: The FCA has published its Policy Statement on changes coming into effect from 3rd January 2018. Amongst these are changes to the Handbook to align with the change in definition of advice, including a relaxing of the TC requirements for those giving information and guidance on retail investment products. We believe this move is incompatible with the established approach of holding firms to standards which ensured that clients were dealing with qualified professionals and will continue to raise this matter. Click here to see our FAMR update.
Innovation: The FCA has also published a report outlining lessons learned during the first year of its regulatory sandbox. The sandbox allows firms to test innovative products, services or business models in a live market environment, while ensuring that appropriate protections are in place. Read more here.
FCA Strategic Review of Retail Banking Business models [not to be confused with the work by the CMA - see their report here]. Launched in May 2017, the specific objectives of the FCA review are to:
- understand retail banking business models in greater depth
- understand how free-if-in-credit banking is paid for
- understand the impact of changes such as increased use of digital channels and reduced branch usage on business models
The review will encompass retail banks, building societies and credit unions and focus is on business models and what conduct/competition concerns these models may create. The FCA has published its Purpose and Scope but no further update is expected until Q2 2018. Full details can be viewed here.
Live and Local to check if the FCA are running any events, in your area on a topic of interest follow this link to their website.