The Financial Conduct Authority (FCA) has published its Business Plan for the 2018/19 financial year. Unsurprisingly, the regulator says it will need to devote a significant amount of resource to preparing for the UK’s impending exit from the European Union, referring to “its impact both on our regulation and the firms we regulate.”
Aside from Brexit though, the FCA has identified seven priority areas for the year ahead:
- Firms’ culture and governance, and whether these are likely to produce outcomes that will benefit consumers and markets
- Continued supervision of the high-cost credit sector
- Continuing the fight against financial crime, including fraud, scams and money laundering, with the central aim of protecting consumers
- Data security and related issues
- Innovation and competition, and how these are delivering change in the financial sector
- Whether firms are treating existing customers fairly, ensuring they don’t end up worse off than new customers
- Inter-generational issues, such as those concerning long-term savings and pensions, noting that the demographics of UK population are changing, and that different generations have differing financial needs
Andrew Bailey, FCA Chief Executive said:
“The Business Plan is an important way in which we are transparent about our priorities for the year. We recognise that this year we need to dedicate a significant amount of resource to withdrawal from the EU. As a result, setting our priorities this year has involved a particularly rigorous level of scrutiny and challenge to focus on areas where we see the greatest potential for harm.”
Specifically regarding the issue of inter-generational issues, Mr Bailey said this was “a significant public challenge, both in terms of the need for new and affordable savings products and in the information firms give consumers to help them take decisions.”
All firms should note the emphasis on culture and governance, and here the FCA confirms that it will be publishing final rules in summer 2018 on the extension of the Senior Managers and Certification Regime to all authorised firms, and that it will also be examining firms’ remuneration arrangements. The report says that culture and governance “should be a collaborative effort driven forward by staff at all levels”, and adds:
“We expect firms to be able to demonstrate that their purpose, leadership, governance arrangements and approach to rewarding and managing staff do not lead to avoidable or unnecessary harm to their customers.”
Regarding data security, the regulator says it will be carrying out assessments of firms’ ‘operational resilience’, i.e. how prepared they are for a cyberattack, IT systems failure etc. As the FCA will be covering this issue in its focused thematic work, some smaller and lower risk firms will still have their security arrangements scrutinised.
Firms in the high-cost credit sector should again note that they have been singled out in the FCA’s list of seven priority areas as being worthy of special attention. The Business Plan says that firms active in the rent-to-own, home-collected credit, catalogue credit and overdrafts markets can expect particularly close scrutiny.
Specifically, some of the regulator’s main concerns in this area include:
- Rent-to-own – charges for add-ons like insurance and warranties, which can be significant
- Home-collected credit – some consumers paying significantly more interest on the amounts originally borrowed as a result of a re-financing
- Catalogue credit – the high level of arrears among catalogue credit customers and the associated fees and charges; the complexity of these products; and the quality of the information firms provide to customers.
- Overdrafts – the long-term use of arranged overdrafts at levels which can be persistent and unsustainable; and the high charges associated with unarranged overdrafts
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article