This week, the Financial Conduct Authority has issued a number of updates for regulated firms as the UK continues to battle the coronavirus pandemic.
Here we summarise the most recent developments.
Bank branch opening
On Monday (23 March), the FCA confirmed that banks and building societies should try to keep their branches and contact centres open as they are ‘deemed essential for civil and commercial functions’.
The regulator reminded banks and building societies to follow NHS guidelines and take necessary precautions to keep staff and customers safe.
On Wednesday 25 March, the FCA issued an update detailing how banks, building societies, the Post Office and credit unions can continue to provide branch access for essential services, and encouraging customers to use online services where possible.
LIBOR transition plans
Also on Wednesday, the Authority published an update on the impact of the coronavirus on firms’ LIBOR transition plans. Working with the Bank of England and members of the Working Group on Sterling Risk-Free Reference Rates, the FCA has discussed the impact of the coronavirus on firms’ LIBOR transition plans over the coming months.
It confirmed that the end of 2021 is still the target date for firms to meet to transition from LIBOR. It acknowledged, though, that some of the interim transition milestones may not be met as firms – particularly in some areas, like the loan market – have made less progress on transition.
The Bank of England, FCA and Working Group will continue to monitor and assess the impact on transition timelines, and provide an update to the market as soon as they can.
Joint statement from the FCA, FRC and PRA
On Thursday 26 March, the Financial Conduct Authority (FCA), Financial Reporting Council (FRC) and Prudential Regulation Authority (PRA) jointly announced a series of actions, including:
- A statement by the FCA allowing listed companies an extra two months to publish their audited annual financial reports
- Guidance from the FRC for companies preparing financial statements in the current uncertain environment and guidance from the PRA regarding the approach that should be taken by banks, building societies and PRA-designated investment firms in assessing expected loss provisions under IFRS9.
- Guidance from the FRC for audit firms seeking to overcome challenges in obtaining audit evidence.
Also yesterday (26 March) the Financial Conduct Authority outlined its expectations around financial resilience for the firms it regulates.
Saying that it wants ‘to see firms to continue operating in this challenging period’, the regulator confirmed that it intended to ‘provide flexibility to regulated firms to ensure this’.
- Firms that have been set capital and liquidity buffers should use them to support the continuation of the firm’s activities.
- Firms should plan ahead and ensure the sound management of their financial resources. This might include using government schemes designed to help firms through this period to meet debts as they fall due.
- If a firm needs to exit the market, planning should consider how this can be done in an orderly way while taking steps to reduce the harm to consumers and the markets.
- Firms that are prudentially regulated by the PRA should consider the PRA’s requirements and discuss their concerns with them, as well as keeping the FCA notified of any significant developments.
Business co-operation under competition law
Both regulators will take a consistent approach to their competition law enforcement activity in the financial services sector (under the Competition Act 1998 and/or the Treaty on the Functioning of the European Union). The announcement said that:
‘It is important that competition law does not impede firms from working together to provide essential services to consumers in the current coronavirus situation’, although ‘neither the FCA nor the PSR will tolerate conduct that seeks to exploit the situation and harms consumers’.
The regulator will doubtless continue to issue updates on the situation and the ways that financial services firms should respond. We will continue to share the advice as it is issued.
Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.