The FCA has published its 2016/17 Business Plan. This sets out the FCA’s work programme and priorities for the coming year. The plan also includes its Risk Outlook which identifies trends in the markets and firms it regulates, and risks which the FCA says it needs to respond to.
The Business Plan outlines seven priority themes within its Risk Outlook. These seven themes are: pensions, financial crime and anti-money laundering, wholesale financial markets, advice, innovation and technology, firms’ culture and governance, and the treatment of existing customers.
Items of particular interest
The FCA notes that it will ensure the effective implementation of the Senior Managers and Certification regime in the banking sector and develop its policy for the extension of the regime across the financial services sector.
On financial crime the FCA states it will take tough action against wrongdoers, working closely with industry and law enforcement and will take steps to help people to protect themselves against crime through its ScamSmart campaign. The FCA will also explore ways in which technology solutions can help deliver effective and proportionate anti-money laundering outcomes. Finally, the FCA will roll out its financial crime annual data return and will work closely with HM Treasury on the Fourth Money Laundering Directive 2015.
In relation to innovation and technology, the FCA notes that cyber-attacks are increasing. Therefore, it plans to communicate expectations relating to effective IT and operational resilience. The FCA also aims to launch its regulatory sandbox. The purpose of the sandbox is to create a safe place for businesses to test new ideas to ensure they meet regulatory requirements.
The FCA explains that it will continue to support and drive culture change and will focus on the most significant drivers of good or poor mindsets, such as incentives and remuneration, and the steps firms take to address associated risks.
With regard to the treatment of existing customers, the FCA explains how it has seen poor treatment of back book customers (existing customers who have become inactive). For example, firms are not informing these customers about other available products, are applying switching or exit fees or are creating other barriers to discourage existing customers from changing providers or products.
In 2015, the FCA issued a consultation paper which proposed setting a deadline for making PPI complaints and also proposed new rules and guidance for firms on handling PPI complaints. In 2016/17 the FCA will consider the responses to the consultation, decide its final approach and if appropriate, publish a policy statement.
The FCA explains its new approach to supervision. Previously, the FCA used four categories (C1-C4) for the conduct classification of firms, but it has simplified this approach. Firms are now classified as either fixed portfolio or flexible portfolio. Fixed portfolio firms are allocated a named supervisor and are proactively supervised using a continuous assessment approach. The majority of firms are classed as flexible portfolio. These firms are not allocated a named supervisor but are instead proactively supervised through a combination of communication, engagement and education activity.