This week, the Financial Conduct Authority (FCA) released its 2018-19 Business Plan. The plan sets out the regulator’s key priorities for the next 12 months.
Here we look at what these priorities are and what they might mean for your regulatory compliance plans.
The FCA’s plans for EU withdrawal
The UK’s plans to leave the EU represent one of the biggest priorities for the FCA in 2018-19. The plan says that ‘Preparing for and implementing the changes resulting from European Union (EU) withdrawal is inevitably the priority for our discretionary activity’.
The plan sets out five priorities in this area:
- Working with the Government
- Ensuring an appropriate transition for EEA firms
- Working with regulated firms and monitoring the risks to the FCA’s objectives
- Cooperating with the FCA’s international partners
The plan also sets out seven priorities that cut across the different financial sectors it regulates. These cover the following:
- Firms’ culture and governance
- Financial crime (fraud and scams) and anti-money laundering
- Data security, resilience and outsourcing
- Innovation, big data, technology and competition
- Treatment of existing customers
- Long-term savings, pensions and inter-generational differences
- High-cost credit
Below we look in more detail at what each one means for regulated firms.
Firms’ culture and governance
Here, the regulator’s focus is on finalising the rules around extending the Senior Managers and Certification Regime (SMCR) to all FSMA firms.
The regime will bring increased individual accountability – read in more detail about FCA fines in 2017.
Other culture and governance priorities include establishing a public register, on which the FCA will consult by summer 2018, and a focus on firms’ remuneration arrangements, looking in particular at consumer credit firms but also the wider financial sector. This work aims to identify the potential or actual harm created by the remuneration schemes of firms that are not subject to the FCA’s Remuneration Codes.
The plan aims to create firm culture and governance that will ‘drive behaviours and produce outcomes likely to benefit consumers and markets’.
Financial crime (fraud and scams) and anti-money laundering
Priorities here include tackling money laundering and publishing findings of the regulator’s review of money laundering in the e-money sector.
The new Office for Professional Body Anti-Money Laundering Supervision (OPBAS) will be embedded, and the recommendations of the Financial Action Task Force – a global body to tackle money laundering – will be taken into account.
The FCA also intends to raise awareness of frauds and scams, and improve intelligence sharing with other agencies.
Data security, resilience and outsourcing
Areas of focus here include an assessment of firms’ operational resilience. The FCA will also assess the risks of outsourcing and third-party providers as outsourcing comes with its own set of FCA rules.
Looking at the data and resilience implications of the second Payment Services Directive (PSD2) and Open Banking will also be priorities.
Innovation, big data, technology and competition
This is a theme the regulator holds dear, and there is no let up in its championing of innovation in 2018-19.
Priorities are to:
- Assist firms through the FCA Innovate programme
- Allow firms to test viability via its regulatory sandbox
- Test and apply regtech and analytics to regulation – FCA to automate regulation – what it means for you?
- Review retail banking business models
- Review firms’ use of data and publish a Memorandum of Understanding with the Information Commissioner’s Office – GDPR update from the FCA and ICO
- Publish new rules on crowdfunding
- Review cryptocurrencies
Treatment of existing customers
Another topic that the FCA has been addressing for some time, with new guidance for insurers on communicating with existing customers issued in 2016. This year, the FCA plans to focus on understanding retail banking pricing practices in this area.
Regulation for claims management firms comes into force in 2019; the regulator aims to communication with claims management companies in advance of that.
Claims inflation in general insurance also comes under the spotlight, and the FCA hopes also to help consumers make informed decisions on insurance.
Competition will be increased among current accounts and in the cash savings market. Finally, rules will be published to give more SMEs access to the Financial Ombudsman Service.
Long-term savings, pensions and inter-generational differences
Pensions – people’s understanding of and approaches to them, as well as work on competition and pension transfers, is another area of focus.
The regulator will deliver a package of remedies as a result of its Retirement Outcomes Review.
This, again, is something the FCA has had in its headlights for some time. Since the FCA started regulating the consumer credit industry, it has taken steps to address the issue of high-cost credit, an approach that the regulator believes will build on ‘the significant impact already made in the market’.
In 2018-19, this will continue, with plans to:
- Consider alternatives to high-cost credit
- Finalise its review of high-cost credit products, including rent-to-own, home-collected credit, catalogue credit and arranged and unarranged overdrafts
As in previous years, the Business Plan isn’t a light read, coming in at 62 pages, but it is worth reading to make sure your work is in line with the regulator’s priorities and meeting its requirements.
As ever, underlying much of the regulator’s ambition for the coming year is a desire for firms to improve their self-regulation, and implement cultures that support a compliant approach.
If you want practical tips and advice on building a compliance-oriented culture in your business, you can contact us here.