The Financial Conduct Authority (FCA) has outlined plans to make better use of data in its supervisory activities. To achieve this, the regulator says it will take the following steps:
- Investment in new technology
- Greater use of data from external sources
- Investment in new working practices
- Setting up data science units in certain areas of the organisation
- Migrating to cloud-based IT infrastructure
- Reviewing historical data and how these indicate consumer harms
- Deciding whether current and recent data mean that it needs to intervene in a particular sector
- Deciding whether current and recent data indicates that financial crime has occurred
- Greater use of predictive analytics, especially with regard to identifying trends amongst firms
In summary, the FCA press release says:
“The strategy outlines the [FCA]’s increased focus on the use of advanced analytics and automation techniques to deepen its understanding of how markets function and allow the FCA to efficiently predict, monitor and respond to firm and market issues.”
The FCA requests regular data returns from all authorised firms. This is a vital tool it uses to get an indication of whether there are any issues of concern at individual firms. Clearly the regulator does not have the resources to do a comprehensive, full day annual audit of all 58,000 firms. Failing to submit a data return on time remains one of the main reasons why the FCA might cancel a firm’s permission to conduct regulated activities.
The regulator says that the “ever increasing number of firms” is one of the reasons why it needs to adopt a new data strategy. With the FCA expected to regulate so many firms, without an increase in resources, it now needs to examine ways in which it can ‘work smarter’. Another issue cited by the FCA is that authorised firms are using increasingly sophisticated technology in their everyday business practices, meaning that the regulator needs to understand this technology in order to supervise them.
Firms that have, in the past, found it time consuming, costly and stressful to complete their FCA data returns may be cheered by the news that the regulator is assessing the viability of a system known as Digital Regulatory Reporting. It is hoped that this will allow firms to automatically supply data that is requested by the FCA.
Christopher Woolard, acting CEO at the FCA, said:
“Advances in technology are changing the nature of the firms and markets we regulate. Our Data Strategy provides a clear path for us to ensure we have the necessary skills and processes in place to remain at the forefront of this change. In keeping with our Mission, a data-driven approach to regulation allows us to anticipate harms before they crystallise, better understand the effect on consumers of changing business models and to regulate an increasing number of firms efficiently and effectively.”
Examples of data recently published by the FCA include:
- £384.6 million was paid in September 2019 to customers who complained about payment protection insurance (PPI). This takes the amount paid since January 2011 in PPI compensation to £37.2 billion.The £384.6 million is higher than any of the figures for the first six months of last year, but the July figure of £432.9 million and the August amount of £391.6 million were both higher than the September figure
- 4,290,000 complaints were made to FCA-authorised firms in the first half of 2019. 49% of these concerned PPI and complaints related to PPI increased from 1.58m to 2.12m between the second half of 2018 and the first half of 2019. However, excluding PPI complaints, the volume of complaints received decreased from 2.32m to 2.18m between the two periods
- 250,000 people are in closed mortgage books or have mortgages owned by firms that are not regulated. But of these 250,000 ‘mortgage prisoners’, 170,000 are up-to-date with payments and would be eligible to switch under new FCA rules. Only 43% of mortgage prisoners have a mortgage that is entirely capital repayment; and 47% owe more than £100,000
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