Last month, the FCA produced its business plan for 2019-20, setting out key priorities and activities for the year ahead. There were plenty of nuggets to help firms improve their risk profiles as well as a raft of insight into regulatory strategy.
Brexit challenges were centre stage, although it was admitted that balancing the demands of this with other pressing requirements was far from easy. The regulator has published its final guidance for firms – although this can only go so far, given there has been no clear exit plan agreed as of yet.
Chief executive Andrew Bailey said in a recent podcast that the FCA was mindful of the need for “optionality” in the plan given the ongoing uncertainty and said although the withdrawal plan was still unannounced, the next part of the overall negotiations will be of great importance. Mainly, these will cover the future relationship between the UK and the European Union as well as, for financial services in particular, the vital issue of equivalence and whether or not the EU will extend this to the UK post-Brexit.
The FCA will seek a smooth transition and have a crucial role in ensuring the UK holds on to its position as a well-regulated major financial centre
Other core themes include:
The FCA is “finishing off” its work to produce a better regulated high cost credit market, with new rules related to payday loans and the rent to own sector and it will also continue its work on fairer overdrafts.
A further strand of work is the way financial services firms treat loyal customers –those who do not shop around – for products such as mortgages, savings accounts, household and motor insurance.
Whether to introduce a formal statutory duty of care has been a hot topic for months and there was extensive feedback to a recent discussion paper. The FCA is now unlikely to introduce this but it will be doing more work to ensure the Treating Customers Fairly principle is embedded into firms’ practices.
Bailey said this is an evolving issue and while there have been some big changes in terms of attitudes to treating customers fairly, it was not consistent. He said:
“A strong culture requires firms to realise it is in their interest to do the right thing and not just what the rule says.”
Managers must lead from the front and ensure poor behaviours such as discrimination and
bullying are tackled early – not only are these unacceptable in the workplace, but they can
also impact on business objectives.
This December will also see the Senior Managers and Certification Regime extended to apply to all FCA-authorised firms. Remuneration practices are also under the spotlight and the regulator will review these to ensure they are not detrimental to customers.
This will be an important area for firms to focus on and the regulator will expect to see efforts made to ‘future proof’ systems so that customer data is protected and they do all they can to guard against cyber attacks. Firms will also need to show they are testing against any potential vulnerabilities on a regular basis and as Bailey said, “nothing can be done conclusively as it (the risk) continually evolves and mutates.”
Financial crime and Anti Money Laundering (AML)
This remains a firm FCA focus of attention and the regulator has shown it is prepared to issue huge fines in the cases of wrongdoing. Firms need to be able to show, with documentary evidence, that they have effective ways to spot crime and have controls in place.
The regulator also wants to encourage firms to use technology in their AML strategies. It has been holding regular ‘TechSprint’ events focused on how new technology can help combat financial crime globally and to boost collaboration. A follow up event will take place on 29 July to 2 August.
The full business plan contains many more themes and is well worth a business' time to familiarise
with. Brexit may be an ongoing distraction but the FCA is making it clear that day to day supervision is very much still top of the agenda.
Find out more how the FCA implemented Xactium Risk to improve its risk management approach.