Financial Conduct Authority (FCA) chief executive Andrew Bailey used much of his recent speech to the British Insurance Brokers’ Association Conference to summarise the content of his organisation’s Business Plan for the 2018/19 financial year.
The Plan comprises two main components: planning for the UK’s impending exit from the European Union, and the seven main cross-sector priority areas on which FCA will focus much of its supervision activity over the next year. These ‘priorities’ are:
- Firms’ culture and governance, and whether these are likely to produce outcomes that will benefit consumers and markets, with particular emphasis on the way firms reward and incentivise their staff
- 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, examining the risks of firms falling victim to a cyberattack, or experiencing a major IT systems failure, or otherwise losing a large quantity of data
- Innovation and competition, and how these are delivering change in the financial sector, and whether consumers are experiencing harm as a result of these changes
- 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. Here, the FCA is particularly concerned about the number of firms giving unsuitable pension transfer advice
Rather than passing any judgement on the merits or otherwise of Brexit, Mr Bailey said the FCA’s job was “to roll our sleeves up and get on with the task of effective implementation.” He welcomed the fact that there is likely to be a transition period following the UK’s official exit from the EU in March 2019, owing to the risks surrounding any ‘cliff-edge’ scenario, whereby the UK is a full member of the EU on one day, but the next day is outside the Union without effective structures for adjusting to its new status.
Specifically, he spoke of the prospect of “a sudden and disorderly falling away of the passporting system.” Passporting allows firms authorised with the national financial regulator in one European Economic Area (EEA) member state to do business in all other member states, without requiring specific authorisation from other national regulators. Passporting may continue during any transition period, but politicians from both the UK and the EU have ruled out any prospect of the passporting system continuing in the longer term.
Regarding each of the seven cross-sector priorities, Mr Bailey’s remarks included:
On the subject of firms’ culture and governance:
“We will continue to support and engage with firms to ensure their purpose, leadership, governance arrangements and approach to rewarding staff do not lead to harm to customers. Key work in this area includes finalising the rules for the extension of the Senior Managers and Certification Regime to all Financial Services and Markets Act 2000 (FSMA) firms.”
On the subject of high-cost credit:
“We have already taken action to protect potentially vulnerable consumers by putting in place new rules for high-cost short-term credit firms, as well as taking supervisory and enforcement action against credit firms who don’t meet our standards. This year we will consolidate this work by looking at alternatives to high-cost credit, focusing on solutions designed to increase choice and availability and barriers which may stymie these efforts.”
On the subject of data security, resilience and outsourcing:
“Our work here focuses on ensuring that firms are more resilient to cyber-attacks and technology outages. One area we are focusing on is outsourcing arrangements, where the service provider supports many firms and so the impact of any disruption is magnified.”
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