Regulation Archive

Conduct: The PRA and FCA have each published the relevant policy statements [PS] to last year's consultations on amendments to the Senior Managers and Certification Regime (SMCR). FCA PS 17/08 and PRA PS12/17 extend the SMCR to all Non-Executive Directors, effective 3rd July 2017, whilst the same PRA PS and FCA 17/09 make clear expectations for, and the approach to, enforcement of the 'duty of responsibility' which came into effect May 2016. The PRA PS also introduces a new Senior Manager function, and a related Prescribed Responsibility: the Chief Operations SMF. 
 
Advice Knowledge & Competence: The FCA has also published PS 17/11. This provides for an update to the Approved Examination Standards (AES) of appropriate qualifications. The amendments to the AES go ahead as proposed in the consultation and are intended to bring the standards up to date with modern practice [the original syllabi date back to 2009 with only minor tweaks since]. The number of regulation and ethics AES will also reduce from 3 to 2 [one at education Level 3 and one at Level 4]. New guidance will be added to the TC Handbook to help users navigate the qualification tables. The FCA will also aim to improve the layout of tables to make them easier to use. This is likely to include separating out current qualifications from those legacy qualifications which can no longer be studied. Finally, there was insufficient support to introduce an additional equity release qualification. For those interested in the range of the debate please see section 2.17-2.26 of the PS.
 
Innovation: The FCA has published an update which reveals the firms that were successful in their applications to begin testing in the second cohort of the sandbox.  
 
Competition and Market Authority (CMA): the outcomes of the CMA's 2016 retail banking investigation which outlined plans to enhance competition in the personal current account and SME banking markets are now being implemented.  View the full report here or access the CMA's useful overview document 'Making banks work harder for customers'. Our response to the CMA can be viewed here
 
Access to Financial Services: The FCA has released a short video on consumer access to financial services to accompany an occasional paper on the issue. The Executive Summary outlines in diagram form the key issues and some suggested ways to remove barriers. Watching Access to Financial Services  takes about 5 minutes, and for those interested in this issue you can download the paper here.  

Also of interest, is a discussion paper: Ageing population and financial services. This has been produced by the FCA to support its strategy work on the financial needs of an ageing population. 

Members interested in this issue might also find our webcast 'Vulnerable Customers' of interest.

Assessing Creditworthiness in Consumer Credit – The FCA consulted over autumn [CP17/27] on changes to rules and guidance on assessing creditworthiness, including affordability, and aims to clarify the regulator’s expectations. Of interest may be the focus on unarranged overdrafts. 

Customer Understanding - Retail banks and building societies – The FCA has published the results of its survey of 18 retail banks and building societies in TR17/1. The report shows that firms are increasingly alert to the importance of assessing customer understanding, although a few firms continue to confuse customer understanding with customer satisfaction. 
 
Handbook changes to reflect the application of the EU Benchmarks Regulation; this consultation paper [CP17/17] proposed to introduce a common framework to ensure benchmarks are robust and reliable, and to minimise conflicts of interest in benchmark-setting processes. The FCA also intends implementing an amendment relationship to Mortgage Credit Directive (MCD). This will require lenders and tied credit intermediaries who offer any mortgage linked to a benchmark rate to make available the name of the benchmark, who administers it, and the potential implications for consumers. This requirement comes into force on 1 July 2018 (as opposed to 1 January 2018 for the rest of the changes). We anticipate the Policy Statement very soon [noted as October 2017].
 
Product Advertising: The FCA has published an occasional paper: From advert to action: behavioural insights into the advertising of financial products. We all know financial services products can be complicated, and advertising can often help simplify the message to help consumers make choices. This research looks at what is actually happening.
 
Starting Up: Of some interest is a guide released by the PRA's New Bank Start-Up Unit explaining its approach to licensing new banks. You can view the guide here.
 
Financial Advice: In April 2016 the FCA published the findings of its survey of firms providing financial advice is now available. The survey informed the Financial Advice Market Review and provided the regulator with a better understanding about the profile of the customers of advice firms, the barriers that firms face in expanding the provision of advice to the mass market, the use of technology in the advice process, as well as views on the future of the advice market. It also provided the FCA with some analysis on how retail investment firms have responded to the new pension freedoms. This document provides some interesting data on market size and diversity.
 
Mortgages: In April 2017 the FCA published its finalised guidance on the fair treatment of mortgage customers in payment shortfall [FG17/4].  One of the key aspects is that firms are asked to provide customers with details of debt advice services in their communications.   
 
Related documents: Findings of the FCA thematic review of the mortgage sector [TR16/04] – Embedding the Mortgage Market Review. states that it is important that the mortgage market continues to develop a range of products that can meet the lending needs of older borrowers. 
 
Mis-Selling: The House of Commons Committee of Public Accounts report into Financial Services Mis-selling was highly critical of the role claims management firms were allowed to play in taking £5 billion of compensation which should have gone to victims. Both the Treasury and FCA are challenged by the Committee to ‘do better’, particularly as it was found that the Treasury does not know how effective the FCA is in reducing mis-selling, and there are no good indicators of the current level of mis-selling. This report requires the regulators to undertake additional work, such as development /implementation of ‘real-time’ indicators of the extent of mis-selling.