Regulation Watch aims to provide members with updates on the activity of the sector's regulators, highlighting areas of specific interest.
Recommended - highlights speeches, videos and audio relating to hot topics
Recent News - a digest of some of the most relevant publications and updates released by the main regulatory bodies
Big Changes in Retail Banking: A blog from the Competition and Markets Authority (CMA) which takes considers the impact on customers of the banking reforms it introduced 2 years ago and takes a look forward to what further developments we can expect this coming year.
Penalties, remediation, and General Principles: Speech by Mark Steward, FCA Executive Director of Enforcement and Market Oversight, in which he discussing financial penalties as a deterrent, how it differs from the purpose of enforcement and offers some observations from issues arising from cases regulatory over the last 12 months, involving breaches of the General Principles.
FCA Interim Chief Executive named: Chris Woolard, currently the FCA’s Executive Director of Strategy and Competition, has been named as the interim CEO of the regulator. He will take on the role when Andrew Bailey departs this March to become Governor of the Bank of England. It has also been announced that Sheldon Mills is to be the Interim Executive Director of Strategy and Competition when Mr Woolard steps into the CEO role.
Challenges and Achievements: This is the final FCA Insight podcast from outgoing CEO Andrew Bailey, in which he notes his pride in the regulator’s work, particularly with regard to vulnerable consumers and high cost credit. He flags the unique role of the FCA [when compared to other regulators internationally] in leading retail conduct regulation and calls on large technology companies to work with the regulator to help protect consumers.
Global regulation, local solutions: Thoughts from Nausicaa Delfas, Executive Director of International at the FCA, on the role of global regulators in ensuring firms can compete on a level playing field across jurisdictions, and in reducing opportunities for regulatory arbitrage. She also touches on what lies ahead for the regulator following the UK's withdrawal from the EU.
Sustainable Finance Factsheet: The EU has put together this simple but informative fact sheet outlining its commitment to three ambitious climate and energy targets by 2030.
Is this the decade of the Credit Union?: Speech by Charles Randell, Chair of the FCA, delivered at the National Credit Union Forum, in which he references recent research on unaffordable debt and highlights the work the FCA has committed to with a view to improving financial resilience and providing more alternatives to high cost credit.
Getting to the Core of Culture: John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, speaks about the importance of 'principled decision making and accountability' rather than relying exclusively on rules and policies, as the most effective safeguard against wrongdoing and unethical behaviour.
Regulation in a Changing World: This speech by Christopher Woolard, Executive Director of Strategy and Competition at the FCA, sets the context for why now is the time to consider what the future of regulation might look like. He outlines that, in addition to the anticipated consultation on Duty of Care [see below for background] and review of the Handbook, there will be an open invitation to all to engage with thoughts and ideas about the future of regulation, and a review of the Principles themselves.
Understanding Pay Gaps: An interesting speech by the Bank of England's Andy Haldene which gives some fascinating insight and statistics about gender and ethnic minority pay gaps.
Turning Technology Against Financial Crime: The FCA's Executive Director of Supervision, Megan Butler uses this speech to talk about on how technology can be used to detect and disrupt financial crime, and ultimately the criminals who seek to exploit the system. She refers to the establishment of the Analytics Centre of Excellence, an internal initiative to drive the use of data science, machine learning and AI across the whole of the FCA.
Machine Learning in UK Financial Services: An interesting blog by a team at the Bank of England which outlines the findings of a joint survey with the FCA in 2019 to better understand the current use of machine learning (ML) in UK financial services. This included the finding that the median firm uses live ML applications in two business areas, and this is expected to more than double within the next three years.
UN Principles for Responsible Banking: On 22 September 2019, 130 global banks became the founding signatories of the UN Principles for Responsible Banking yesterday at the UN General Assembly in New York. The Principles aim to promote sustainable and responsible banking - you will find our programmes cover these as green finance and professionalism in banking. For our response please see our news section.
Improving the suitability of financial advice: Although this speech by Debbie Gupta, Director of Life Insurance and Financial Advice Supervision at the FCA is aimed specifically at the financial advice community, there are some aspects which we might all usefully note. "Challenging misconceptions and client education is core to good advice. It is valuable. You are the experts. You will always know more than your client. And we expect your expertise to support your clients in this way. It is what we expect of the services you are paid to provide."
The future of regulation: AI for consumer good: Speech by Christopher Woolard, FCA Executive Director of Strategy and Competition which outlines recent findings on how AI is currently being used in the financial services sector as well as flagging the need for sound governance around the use of AI and machine learning. The FCA are working with the Alan Turing Institute to explore the transparency and 'explainability' of AI in the sector and we can expect more later in the year/start of 2020.
Open letter on climate related financial risks from the Governor of Bank of England Mark Carney, Governor of Banque de France François Villeroy de Galhau and Chair of the Network for Greening the Financial Services [NGFS] Frank Elderson. It outlines the role of central banks but reminds us that 'climate change is a global problem, which requires global solutions, in which the whole financial sector has a crucial role to play'. This was timed to highlight the publication of the NGFS Call for Action which is accompanied by a short explanatory video.
Avoiding the storm: Climate change and the financial system: Sarah Breeden, Executive Director, International Banks Supervision at the bank of England, adds her voice to the rallying call for firms to take climate change seriously and to take action now. This times with the release of the PRA's Policy and Supervisory Statements on Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change. You can also read our blog series on climate change.
Less cash, but not cashless: Speech in which Sarah John, Chief Cashier at the Bank of England makes it clear that ensuring that people can continue to choose to use cash isn’t something that the central bank can do alone. Sarah John also spoke at one of our events recently: you can watch this online.
New Directory of Financial Services workers: The FCA has published its Policy Statement [PS 19/7] creating a new Directory of Individuals, to help consumers and other stakeholders check on the current and past status of individuals covered by the Certification Regime. Whilst delighted that our calls for the new directory to include details of an individuals' professional standing have been included, in our view the FCA has not gone far enough by failing to include details about the level of professional membership held. In its feedback the FCA stated the reason for this as the lack of 'consistent language when describing comparable levels of accreditation (e.g. fellow, member, Chartered etc) making comparisons difficult for most consumers'. Working with our Alliance partners, we will challenge this concern and remain hopeful that a future iteration of the directory will provide better recognition of the knowledge, skills and experience of our qualified members. Our response to the original consultation can still be viewed on the Alliance website.
The FCA Register will remain and hold data on those individuals that require FCA approval, however the new directory will also include those individuals assessed as fit and proper by their firm.
Sector Views: The Financial Conduct Authority [FCA] has published its annual Sector Views. These are used to inform the FCA’s Business Plan, helping the regulator assess where its focus should lie. Amongst the concerns is the fact that 7.4 million UK adults are over-indebted and find their financial commitment a burden. The analysis also shows that many of the harms are created by a significant number of regulated smaller firms regulate or firms beyond the FCA’s remit.
Cash Savings: The Financial Conduct Authority [FCA] has published a consultation Introducing a Single Easy Access Rate for cash savings. This forms part of the work resulting from the Competition and Markets Authority (CMA) recommendations to address the so-called 'loyalty penalty' and is in line with the FCA's own priorities with regard to the fairer treatment of long-standing and vulnerable customers. The proposals focus on reducing the number of interest rates offered on easy access savings accounts. The consultation closes on 9 April 2020. The CMA appears to welcomes these steps and the fact there is a clear timetable set out for implementing any new rules and assessing their impact in a speedy way.
Mortgage Market: The CMA seems less pleased with the progress in this area. Acknowledging the work done by the FCA in researching mortgage switching, it calls for faster progress in developing ways that help or protect longstanding customers who could switch but do not. For its part, the FCA has indicated that in Q1 2020 it will publish new rules designed to help the market work better. During the consultation last year, the remedies package outlined proposals to allow more interaction with customers before firms are required to give advice and to develop greater clarity between advice and information. The original consultation can be found here. In our response we highlighted the importance of qualified, professional mortgage advice and also the important role of mortgage advisers as we move towards a more sustainable economy in offering, and helping consumer make, responsible and sustainable lending/borrowing decisions.
Andrew Bailey, current CEO of the Financial Conduct Authority [FCA] was announced as the new Governor of the Banker of England. Dr Bailey will take up his post on 16 March 2020 and we can only speculate that the search for his successor at the regulator began during the 2019/20 festive period. No announcements made yet, but we continue to watch with interest.
Outgoing Governor, Mark Carney has been appointed as the UN's special envoy for Climate Action and Finance. He was busy over the festive season speaking about the need for positive action by firms now - coverage by the BBC can be accessed here taken from his interview on the Today Programme, guest edited by Greta Thunberg.
Senior Managers and Certification Regime: Data collection for the new Directory of Individuals is open for banks, building societies, credit unions and insurance companies (and their appointed representatives) - data must be submitted before 9 March 2020 with an expected launch of the new Directory by the end of that month. All other firms must submit between 9 December 2019 and 9 December 2020. In July the FCA published its final rules on extending the SM&CR to FCA solo-regulated firms, including claims management companies (CMCs). The policy statement (PS19/20) also makes final rules on the new Directory of individuals working in financial services. In our various responses we have consistently pushed for more details to be included that provide greater understanding about the professional standing of Directory Individuals. See our news section for more information.
Regulators Focus on Climate Change Related Risks: In October 2019 the FCA published its Feedback Statement to the 2019 Discussion Paper on Climate Change and Green Finance. Consistent with our feedback, the regulator appears to favour a “comply or explain” approach to encourage more consistent disclosures in capital markets and has committed to taking a tougher stance on “greenwashing” by firms. We anticipate a consultation paper in early 2020 proposing new disclosure rules for certain issuers aligned with the TCFD’s recommendations and clarifying existing disclosure obligations relating to climate change risks. The FCA also published a statement on the joint work with the Financial Reporting Council in this regard, the latter updating its Stewardship Code for 2020.
The Bank of England meanwhile has published a discussion paper to consult on its proposals for stress testing the financial stability implications of climate change as part of the 2021 biennial exploratory scenario (BES). This is designed to test the resilience of the current business models of the largest banks, insurers and the financial system to climate related risks and therefore the scale of adjustment that will need to be undertaken in coming decades for the system to remain resilient. This follows on from the Prudential Regulatory Authority supervisory statement aimed at enhancing banks’ and insurers’ approaches to managing the financial risks from climate change, published in April 2019.
Duty of Care: The FCA had originally indicated that a consultation paper would be published in Autumn 2019. The feedback to the original discussion paper, indicated that the FCA was looking at how it applies the existing regulatory framework, and considering revision of/addition to its Principles for Business. We were satisfied with this approach as it follows the recommendations made in our response to the discussion and look forward to engaging with the next steps which we now hope to see published in early 2020.
Guidance on the fair treatment of vulnerable customers: The FCA has seen some changes in the perception and understanding of issues relating to the treatment of those in vulnerable circumstances. However, firms are seeking greater clarity on exactly what they should be doing and so new guidance has been drafted (GC19/30). The aim of the proposed guidance is to make clear what firms should be doing to ensure fair treatment and to develop some consistency in outcomes. Ultimately it seeks to address what more needs to be done to embed in firms’ a culture of doing the right thing for vulnerable, and indeed all, consumers. The consultation closed on 4 October.
Financial Inclusion and Capability: The Treasury has released its first report outlining the progress made against its objectives. It does not reveal much that is new to followers of this topic, but neatly summarises the number of government led/supported initiatives ongoing.
Cryptoassets: The FCA is now the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for businesses carrying out certain cryptoasset activities under the amended Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs). This means that UK businesses undertaking cryptoasset must register with the regulator. Details can be found on the FCA website. In 2019 the FCA published two pieces of research looking at UK consumer attitudes to cryptoassets, such as Bitcoin or Ether. The research includes qualitative interviews with UK consumers and a national survey. Christopher Woolard, the FCA’s Executive Director of Strategy and Competition commented: 'This research gives us evidence we haven’t had before about how consumers interact with cryptoassets'.
High Cost Credit reforms: In June 2019 the FCA published the Policy Statement (PS19/6) outlining a package of remedies designed to make overdraft pricing simpler, fairer and easier to manage. This was followed in October by PS19/25 which requires firms to publish overdraft pricing information alongside information on current accounts. The intention is that this will allow easier comparison between products in the market and will increase transparency of costs of an overdraft. The PS also amends the definition of private bank. The new rules will come in to force on 6 April 2020, apart from refused payment fees guidance, which took effect immediately and the repeat use rules, which came into force on 18 December 2019. The FCA has also produced a useful summary of its interventions since taking on responsibility for the regulation of consumer credit in 2014.
Financial Stability Board [FSB] its toolkit for Strengthening Governance frameworks to Mitigate Misconduct Risk 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’. The FSB is also developing a cyber lexicon aimed at ensuring clear and common understanding of the issues and threats in this field. It comprises a set of 50 core terms related to cyber security and cyber resilience in the financial sector.
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.
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.
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.