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Regulatory Update Oct 2022

In this issue we cover:


New FCA webpage for Consumer Duty

The FCA has published a new webpage to help firms implement the Consumer Duty. It provides further explanation on areas where the FCA has received queries from firms which are relevant to the wider market.

The webpage currently provides additional clarification on three Consumer Duty topics:

Implementation Plans

The FCA does not expect firms to have necessarily fully scoped all work required to embed the Duty by this deadline. However, firms’ plans should, by 31 October 2022, be sufficiently developed to provide both firms’ governing bodies and the FCA with assurance that the expectations set out in the Duty have been carefully considered and will be implemented for new and existing products by 31 July 2023.

Consumer Duty board champions

The primary role of the board champion is to support the chair and CEO in ensuring that that the Duty is being raised regularly in all relevant discussions.

Closed Products

Closed products are those that are no longer marketed or distributed to retail customers or open to renewal. For closed products or services, the Duty comes into effect on 31 July 2024.

The FCA intends to keep the webpage updated so look out for updates.

 


ESMA Strategy: 2023-2028

The European Securities and Markets Authority (ESMA) has published their strategy for 2023-2028. While being mindful of market developments and emerging risks, ESMA plans to implement this strategy over the next years, focusing on:

Strategic priorities:

  • Fostering effective markets and financial stability – including implementing the CCP (central counterparties) recovery and resolution regime and considering the impact of decentralised finance and cryptoassets
  • Strengthening supervision of EU financial markets
  • Strengthening supervisory convergence across the EU single market
  • Enhancing protection of retail investors – to further develop retail investor trend monitoring and analysis, concentrating efforts on emerging risks from new and innovative products

Thematic drivers:

  • Enabling sustainable finance – further enhancing their assessments of ESG-related trends, risks and vulnerabilities that can have a high impact on the financial markets
  • Facilitating technological innovation and effective use of data – assessing the impact of technologies used in the financial markets on the regulatory framework, eg, artificial intelligence

 


Transforming data collection

The BoE has recently published a communication to firms outlining the progress of the joint transformation programme. This programme is being jointly led by the FCA and the BoE with industry to transform data collection from the UK financial sector.

There are two key points arising from this publication. The first, phase two, which began on 22 September 2022, focuses on a new set of use cases: incident, outsourcing and third-party reporting (OATP), commercial real estate (CRE) database, review of prudential data collection and retail banking business model data.

Secondly, earlier in 2022, the joint transformation programme made seven recommendations to the BoE and the FCA as a result of the work carried out during phase one. The BoE and FCA agreed to accept, in principle, all the recommendations made by the joint transformation programme industry committee. For some of the recommendations, the BoE and FCA are focused on delivering solutions immediately, and are committed to delivering valuable change by June 2023. For other recommendations, the joint transformation programme will need to explore the solutions further to understand how they might be delivered, and the associated business case.

 


FCA authorisations update

The FCA monitors its operating service metrics for its Authorisations Division and publishes them for transparency and accountability. The latest report from October 2022 includes rated performance metrics on all its key processes and application types.

The update report provides commentary on some of the challenges that the regulator is facing, such as its expanding remit and the often low quality of initial applications. The update also provides a brief overview of improvements that the FCA is working on, such as additional recruitment, system improvements, and planning for expansion of its remit.

 


FCA Consumer Investments Strategy update

The FCA has published an update on the progress made to date regarding its Consumer Investments Strategy. The update sets out the work delivered over the past year and the work that it expects to impact the market over the next year. The FCA also provides insight into its progress concerning longer-term changes to the market.

Key updates include:

  • There were 18,844 consumer alerts published about unauthorised firms (a 40% increase), 59% more visitors to the ScamSmart website and the launch of a £11 million InvestSmart Campaign
  • Implementation of Consumer Duty for new and existing products and services by July 2023, with communications setting out FCA expectations in 2022
  • Implementation of strengthened regime to ensure authorised firms take greater responsibility for their appointed representatives from December 2022
  • The FCA will continue to review the Consumer Investments Strategy and reinforce its work where it identifies growing consumer harm

 


PRA Dear CEO letter on supervision of climate-related financial risk

The Prudential Regulation Authority has written to firms setting out a summary of the capabilities that it expects firms to be able to demonstrate by now in relation to managing climate related financial risk and sharing some thematic observations.

The PRA states that every firm within scope of the requirements set out in SS3/19 should be now be able to demonstrate they are responding to the recommendations and have measures in place to adapt their approach as tools and data develop. Annex A to the letter sets out detailed examples of effective and less effective practice.

The PRA notes this will be an ongoing focus area for supervision, warning that “firms judged not to have made sufficient progress in embedding our expectations should expect to be asked to provide a roadmap explaining how they intend to overcome the gaps.”