On 7 April, the Financial Conduct Authority set out its plans for the coming year in its 2020/21 Business Plan.
In this blog, we examine what the plan tells us about the regulator’s priorities for the next twelve months.
Business planning in a Covid-19 world
Unsurprisingly, the pressures facing the FCA and the firms it regulates from the Covid-19 pandemic are covered. A section of the 2020/21 plan focuses on the challenges posed by the pandemic, described by the FCA as ‘an unprecedented challenge, caused by the greatest public health crisis of our lifetimes’.
It outlines its priorities in the current situation (‘to ensure that financial services businesses give people the support they need, that people don’t fall for scams, and that financial services businesses and markets know what we expect of them’), and sets out the measures it has already taken to keep markets functioning; ensure firms can continue to operate; support consumers, particularly the vulnerable; and enable the public to access essential banking services.
Our recent blog rounds up some of the actions the FCA has taken, while the regulator’s dedicated Coronavirus pages compile all its advice and updates.The pandemic not only creates immediate work to negate its impact, but necessarily affects wider planning. The plan notes that ‘there is enormous uncertainty about the size and nature of potential damage’ to the economy and financial sector, which ‘has made planning ahead much harder’.
While the plan sets out priority areas of FCA work over the next 1 to 3 years, there is a recognition that ‘it may be months before we are in a more stable position and can focus fully on the activities’ in it.
Work that can be progressed now without taking focus from the immediate coronavirus activity, will be done, although the regulator acknowledges that ‘the shape and scale of the issues we need to address may have changed significantly as a result of the virus’. An updated business plan may be issued if needed.
5 key regulatory priorities
The plan sets out five priorities – four external and a fifth, the regulator’s own transformation, which it sees as ‘the foundation to enable us to deliver our external priorities better’.
In setting out its priorities, the FCA also identifies four key outcomes it wants to achieve:
- Make faster and more effective decisions
- Prioritise outcomes for consumers, markets and firms
- Better identify, prioritise and act on intelligence and information
- Influence internationally on issues that affect UK markets and consumers
Priority 1: Enabling effective consumer investment decisions
When pension and retail investment markets work poorly, customers can lose money from unsuitable investment decisions or fraud. These markets currently pose a ‘significant risk of harm’ in the regulator’s eyes. It is targeting three outcomes to support consumers in making effective investment choices, ensuring that:
- Investment products are appropriate for consumer needs
- Customers can make effective decisions about their investments
- Firms and individuals operate under high regulatory standards and act in consumers’ interests
Priority 2: Ensuring consumer credit markets work well
The regulator recognises that vulnerable people are at particular risk when it comes to credit, particularly high-cost credit. The current situation may exacerbate that. It therefore aims to ensure that:
- Consumers can find products that meet their needs
- Consumers do not become over-indebted by being given credit they can’t afford
- Affordable credit is available to smooth consumption
- Consumers are able to take control of their debt at an early stage if they fall into financial difficulty
Priority 3: Making payments safe and accessible
The rapidly-developing payments sector is next in the FCA’s spotlight. New firms, products and third-party providers are changing the market, and the regulator is keen to ensure that consumers and small and medium-sized firms can safely access a variety of payment services.
Currently, the Authority is also concerned about the potential impact of the coronavirus on firms’ financial strength and consumers’ ability to access payment services
Working with the Bank of England, the Government and the Payment Systems Regulator, the FCA’s desired outcomes are that:
- Consumers can transact safely with payment firms
- Payment firms meet their regulatory responsibilities while competing on quality and value
- Consumers and SMEs have access to a wide variety of payment services
Priority 4: Delivering fair value in a digital age
Delivering consumer value has long been a focus of the regulator – the FCA cites its recent work on pricing in insurance, cash savings and mortgages as examples of its efforts.
Its three target outcomes here focus on ensuring that:
- Consumers can choose from products that meet their needs, at a suitable quality and price
- Digital innovation and competition supports greater value for consumers
- Vulnerable consumers are not exploited or targeted with poor value products and services, and access to key products and services is fair
Priority 5: FCA’s transformation
The regulator says that its own transformation – particularly regarding its digital capabilities – ‘is the foundation to enable us to deliver our external priorities better. It will ensure that we are better equipped to meet both our current and future priorities’.
Progress on this will be reported in the FCA’s Annual Report and Accounts 2020/21.
You can read the FCA’s business plan in full on its website.
Expanding on existing priorities
Many of the themes in the business plan are things that the regulator has had in its sights for some time. Of course, the coronavirus pandemic puts a slightly different complexion on the activity and plans set out, and there will doubtless be some fluidity in the objectives and the measurement of progress in achieving them.
Key to meeting many if not all of the FCA’s aims is the creation of a compliant culture. If you want to understand more on how to do this, contact us.
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