On 17 April, the Financial Conduct Authority published its 2019/20 Business Plan.
The regulator publishes a plan every year; it outlines key priorities for the next 12 months, and usually gives regulated firms a good indication of the areas where the Authority will be focusing its attention.
In this blog, we look at the plan and what it might mean for firms in the months ahead.
In its article summarising the plan, Insurance Age claims that ‘Brexit and customer fairness dominate’ the FCA’s approach for 2019/20, while Financial News believes that it brings ‘clarity for crypto’.
Launching the plan, FCA Chief Executive Andrew Bailey said that ‘the future of regulation is a key priority in this year’s Business Plan’.
The plan itself sets out cross-sector and sector-specific priorities. Its cross-sector priorities are:
EU withdrawal and international engagement
Andrew Bailey said that ‘Dealing with Brexit will be the most immediate challenge we face’ and that the regulator plans to engage with other international regulators. This follows the FCA’s release of its latest Brexit guidance in early March. With the date of the UK’s departure from the EU now set for 31 October, Brexit looks likely to dominate the regulator’s plans for a few months yet.
Firms’ culture and governance
The regulator sets out its intention to support culture transformation within organisations, focused on four drivers of behaviour: purpose, leadership, reward and managing people, and governance. It will also extend the Senior Managers and Certification Regime to all firms and review remuneration practices.
The plan states that ‘Operational resilience is a vital part of protecting the UK’s financial system, institutions and consumers’. As part of its work on this, the regulator intends to set ‘clear expectations on outsourcing to third party providers’, as well as working to prevent cyber attacks, including via ‘ethical hacking’ tests.
Financial crime (fraud, scams) and anti-money laundering
The FCA will use ‘intelligence and data’ to tackle money laundering. It hopes to deepen its understanding of fraud in key sectors, and to develop partnerships to help tackle economic crime. It aims to raise standards in professional bodies’ anti-money laundering supervision and do further work on preventing scams.
Fair treatment of existing customers
This is something the regulator has long focused on. This year’s work will concentrate on pricing (specifically in insurance and the cash savings market) and on improving choice in the mortgage market.
Innovation, data and data ethics
The FCA hopes to build understanding of data ethics (the ethical management of data, in particular personal data), to publish proposals on the regulation of cryptoassets, and to encourage innovation and regtech.
As part of its work to ‘shape the debate’ on intergenerational differences, the FCA will start the second part of its Financial Lives survey and consult with firms on the identification and treatment of vulnerable customers.
The future of regulation
The regulator intends to engage with stakeholders on the future of regulation and update its rulebook in light of onshored requirements, as well as reviewing the costs and benefits of regulation for smaller firms.
The regulator’s sector-specific priorities are:
New requirements for asset managers will be implemented; there will be a further focus on stewardship; and the regulator will consult on a prudential regime for MiFID investment firms. The FCA will recommend revised rules and guidance on liquidity management and continue to assess PRIIPs.
Work here includes final proposals to reform the overdraft market; work on high-cost credit products and alternatives to them and embedding regulation of the claims management sector.
Pensions and retirement income
Here the FCA plans to work on remedies from the Retirement Outcomes Review and on competition in the non-workplace pensions market. It will continue to try and improve defined benefit transfers, work on joint priority projects with the Pensions Regulator and with partners on the pensions dashboard project. It will also publish proposals on the effectiveness of Independent Governance Committees.
A further review of advice suitability is planned. The regulator will also analyse the impact of the Retail Distribution Review and Financial Advice Market Review. The remedies in the Investment Platform Market Review will be implemented, the Peer to Peer consultation will be followed up and rules on Contracts for Difference (CFDs) for retail investments will be introduced.
Here, the regulator will implement the Payments Sector Strategy and follow up on findings from the Strategic Review of Retail Banking business models. It will ensure that the new Payment Services Directive (PSD2) and Open Banking are introduced securely, and supervise firms’ responses to PPI claims, as well as promoting the 29 August claims deadline.
General insurance and protection
The FCA will publish findings from the General Insurance Distribution chains review, finalise proposals on reporting of value measures in general insurance, monitor claims inflation and work on renewals transparency, signposting and access for consumers.
Wholesale financial markets
Here the regulator has a wide range of objectives, which include overseeing compliance with the Market Abuse Regulation (MAR); working on a replacement for LIBOR in conjunction with industry partners; continuing to work on MiFID II compliance; and implementation and oversight of a number of EU rules, including EU Prospectus Regulation and EU Securitisation Regulation.
An insight into areas of focus
As in previous years, the FCA’s annual Business Plan gives a good idea of the regulator’s ‘spotlight’ areas. If you want to reduce your risk of an FCA visit or worse, it’s always worth keeping abreast of the areas the Authority is focusing on.
Of course, ideally, your processes and approaches should meet the FCA’s requirements across the board. If this is something your firm struggles with, you might want to download a copy of our whitepaper, How to embed a compliance culture within your business. The whitepaper is free, and you can get a copy from our resource library.
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.