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The Financial Conduct Authority publishes 2018/19 business plan

International Compliance Association

Big Compliance Conversation , Brexit , FCA

The FCA’s business plan for this year has had to strike a careful balance between the considerable amount of work that is going to be taking place on Brexit, which is already well underway, and their other strategic priorities.

 

The Business Plan recognises that they will have to be more flexible within the next year and, therefore, the FCA’s priorities for 2018/19 are as follows.

 

EU Withdrawal

Andrew Bailey, the Chief Executive of the FCA, has advised that the work necessary to put all the withdrawal legislation into place is advancing well, especially with regards to making the FCA ‘rulebook’ fit and operational on the first day of Brexit and assessing the impact of transitional arrangements on the UK’s regulated firms and their users. As is to be expected, this is an extensive piece of work which will be taken forward into the year ahead.

The FCA is also working closely with the UK Government to provide support and technical assistance and advice with EU negotiations and legislation to be introduced by the Government. In combination with this, the FCA will continue to work closely with regulators in the EU to ensure that any risks that could materialise during the transition are mitigated.

Looking forward into a post-Brexit world, it’s important that the UK doesn’t become isolated. Therefore, the FCA will continue to work with regulatory authorities across the EU and globally to ensure suitable supervisory cooperation and information sharing regarding firms, markets, policies and future regulatory regimes.

 

Key pieces of work for the FCA in 2018/19

In addition to the workaround Brexit, the FCA does have a substantial ‘business as usual’ agenda. This includes:

  • Firms’ culture and governance. Culture is very important to the FCA. Therefore, a substantial piece of work for them over the next year will be working on finalising the rules for the extension of the Senior Managers Regime from banks to the rest of the FCA’s population. With the majority of the approximately 50,000 firms under their supervision not being banks, this is a large undertaking for the FCA.

 

  • Financial crime and anti-money laundering. As well as continuing their work on tackling money laundering and financial crime – which will include improving information sharing with law enforcement partners and agencies – the FCA also want to build a better picture of money laundering. With FATF’s Mutual Evaluation Report (MER) of the UK due in October 2018, the FCA is also continuing to review and refine their AML supervisory approach, and, after the MER is published, will take into account any recommendations from the report.

 

  • Long-term savings and pensions. This covers a broad group of issues, as well as several big projects for the FCA in the following year. These include collecting data from all firms that have pension transfer permission, and then intervening if they see evidence of firms providing unsuitable advice following the pension reforms. They are also investigating which consumer groups are most at risk of experiencing a shortfall in their expected retirement provision through under-saving.

 

  • Continuing their work on high-cost credit. Again, this covers a wide range of sectors and several big projects which the FCA is hoping to bring to fruition. This includes looking at solutions designed to increase the choice and availability of alternatives to high-cost credit, as well as considering the options to improve the transparency of regulatory requirements.

 

  • Data security, resilience and outsourcing. As cyber-attacks and cybercrime become more widespread, the FCA wants to focus on ensuring firms are more resilient to these attacks and technology outages and will be working closely with global bodies who prioritise data security, resilience and outsourcing. Another area the FCA will be looking into in the coming year, is the risk of outsourcing and third-party providers, especially outsourcing arrangements where the service provider supports many firms, which makes the impact of any disruption magnified.

 

  • Innovation, big data, technology and competition. Over the next year, the FCA will be continuing their work on Innovate and Sandbox, as well as extending it to be able to operate globally; they already have a number of agreements with authorities in other countries. This will give people the opportunity to test and develop innovations and ideas in more than one market. Regarding cryptocurrencies, there is going to be a task force of the Treasury, the FCA and the Bank of England to develop thinking and publish a discussion paper later this year outlining the FCA’s thinking around policy on cryptocurrencies. Part of the reason for this is, although cryptocurrencies themselves are not currently within the FCA’s regulatory perimeter, some models of use or packaging cryptocurrencies bring them within the FCA’s remit, which makes the landscape complex. The FCA will also be finalising their proposed rules and regulations for crowdfunding due to the need for an appropriate framework in this constantly evolving market and publishing them for consultation in 2018.
  • Treatment of existing customers. The FCA wants to ensure that all customers are well informed regarding the financial products they buy or invest in and that firms are not treating new customers better than existing ones, or giving them more attention. Additionally, they want to ensure firms are operating in the consumers’ best interests. Some of the ways in which they hope to achieve these aims include:
    • Regulating claims management companies
    • Understanding the pricing practices in retail general insurance
    • Exploring whether competition in the cash savings market could be improved, particularly to ensure the fair treatment of longstanding consumers
    • Consulting on proposed new rules that will allow more SMEs to refer disputes to the Financial Ombudsman Service
    • Helping consumers make informed decisions about their insurance needs

 

So, as you can see, a busy year ahead for the FCA. It is expected that much of what is mentioned here will continue to be a priority in future business plans. This is likely to include Brexit as, although the UK should have officially left the EU by this point, there will still be a transition period which the FCA may be required to assist with.  

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