Christopher Woolard, Executive Director of Strategy and Competition at the Financial Conduct Authority (FCA) spoke of the need for his organisation to respond and adapt to changing external factors when he addressed the Deloitte Conduct Risk Roadshow in May 2019.

He began by saying that “constant change is the defining feature of the landscape in which we work”, and said that this was the main reason why so much of the FCA’s recent Business Plan focussed on the future of regulation.

However, in spite of the theme of the speech being ‘change’, Mr Woolard said that there were four areas that the FCA was always likely to continue to focus on, which are:

  • Financial crime and anti-money laundering
  • Firms’ culture and governance
  • Operational resilience of firms
  • The fair treatment of customers

The FCA director cited fraud, market abuse, mis-selling and the Senior Managers and Certification Regime as topical examples of things that fell under one or more of these four areas of focus.

Then he moved on to describing some of the technological initiatives the FCA was participating in:

  • Using machine learning techniques to identify firms or individuals who could pose a regulatory risk
  • Hosting TechSprint events to develop solutions related to anti-money laundering
  • Launching the Regulatory Sandbox, where firms can apply to the FCA to test new technological ideas
  • Sharing knowledge with 34 other national regulators via the Global Financial Innovation Network
  • Employing more science, technology, engineering and mathematics graduates to increase the regulator’s capability in areas such as cybersecurity, data science and technology

Other ways the FCA may be reacting to a changing world, and which were mentioned in the speech, include:

  • Considering whether to introduce a new requirement for authorised firms, namely a duty of care towards their customers
  • Forging new links with regulators across the world as it seeks to adapt to the post-Brexit world
  • Considering the conflicting financial needs of different generations

The FCA has also published an interview where its chief executive Andrew Bailey is quizzed by the regulator’s Head of Business & Consumer Communications, Emma Stranack; and this also focusses on the regulator’s vision for the future.

Mr Bailey echoed the comments of his colleagues by speaking of “the need to invest in data analytics to stay ahead of the times”.

Although he acknowledged that the recent Business Plan may need to be adapted according to the nature of the eventual outcome of the Brexit process, he said that the FCA’s focus on protecting consumers would continue. Here he mentioned two areas of particular focus:

  • The initiatives on high-cost credit, which have already resulted in several sectors of the credit industry being forced to adopt price caps and/or other new rules
  • The ‘loyalty penalty’ being applied to consumers in a number of sectors should they fail to shop around

Next, he turned directly to how the future of regulation may impact the treatment of consumers, and also mentioned the consultation around the possible introduction of a duty to care.

In recent months, the FCA has focussed extensively on the treatment of vulnerable customers, and Mr Bailey said that there would shortly be a consultation on proposed new guidance regarding how firms should treat vulnerable individuals.

The FCA chief then said that operational resilience was the fastest growing risk in financial services and added that data protection and data security issues are also becoming ever more relevant. He added that cyber risks “forever evolve and mutate” and that there will never be a final decisive action that the FCA or firms can take to solve the problem. He called on all firms to carry out more rigorous testing of their systems and cyber defences.

Turning to culture and governance, Mr Bailey said firms should “do the right thing, rather than just do what the rule says.” He said some firms had made “big changes” in this area, but that there was “much more to do”.

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