Click here for an infographic timeline summarising the FCA, PRA and PSR business plans for 2019/20, together with key EU and UK financial services developments. The Financial Conduct Authority published its business plan on 17 April 2019, following the Prudential Regulation Authority’s business plan which appeared on 15 April and the Payment Services Regulator’s business plan on 27 March.
The FCA has identified eight cross-sector priorities: EU withdrawal and international engagement; culture and governance; operational resilience; financial crime and AML; fair treatment of existing customers; innovation, data and data ethics; demographic change; and the future of regulation. These are largely similar to its priorities for the previous year, with a focus on the future of regulation replacing the high cost credit workstream.
The PRA has identified eight strategic goals for 2019/20: robust prudential standards and supervision; adaptation to market changes and horizon scanning; financial resilience; operational resilience; recovery and resolution; competition; EU withdrawal; and efficiency and effectiveness.
The PSR has identified six key programmes of work for the year: Authorised Push Payment scams and implementation of Confirmation of Payee; access to cash through ATMs; market review into card-acquiring services; delivery of the New Payments Architecture; fairness and transparency in access to payment systems; and EU Withdrawal.
Brexit and Culture
Not surprisingly, EU withdrawal is the common theme among the three regulators, and will continue to dominate resources throughout the year. The PRA expresses some hope that the end to Brexit-related work is in sight; that its work on ring-fencing last year will now switch from building to border patrol; and that its work on Solvency II implementation will similarly have come to a close.
The FCA will also continue this year its work on developments that occurred last year: including implementation of the second Payment Services Directive; Open Banking and related developments for Open Finance; and the Senior Managers and Certification Regime, where there are several milestones scheduled over coming months. Its MiFID II work will this year focus on conflicts of interest; and its Market Abuse work will focus on fixed income markets.
Firms’ culture and governance is listed after EU withdrawal as a leading cross-sector priority for the FCA. Although there are no publications planned for this theme, there are a number of implementation deadlines during the year for the Senior Managers and Certification Regime. The FCA also highlights within its cultural work, the themes of purpose, leadership and management capabilities, remuneration and incentives, and firms’ assessment of culture. Among these, the theme of purpose is a new area of focus.
Similarly, although financial crime and AML is listed as the FCA’s fourth priority, there are no planned publications on the theme (unless we count the TechSprint event). However, this priority underpins much of the FCA’s ongoing work, and is marked by implementation deadlines for the fifth and sixth anti-money laundering Directives at the start and close of 2020, as well as the European DAC6 initiative on tax avoidance reporting.
In the first quarter of its financial year beginning in April (which we might be forgiven for thinking of as Q2 of the calendar year), the FCA will publish two papers each on intergenerational issues and mortgages. Already in April 2019, the FCA has published its thematic review of value in the general insurance distribution chain, together with non-handbook guidance on the Insurance Distribution Directive rules. In June or July, the FCA will publish a policy statement on its update to the Prospectus Rules.
The largest number of FCA papers are scheduled for publication by the end of September. These include three further papers on treating existing customers fairly (cash savings, mortgage advice and fair pricing); and a call for input on access to data in wholesale markets. There will be three papers on retail lending and investments (overdrafts pricing, buy now pay later offers and crowdfunding platforms) and a policy statement on illiquid assets and open-ended funds.
Moving along the timeline to the second half of the FCA’s financial year,
the FCA will commence publication of its work on operational resilience, the third theme in its list of priorities. Outsourcing and the management of third parties is again included in the resilience theme this year, as per last year, as well as FCA work on cyber-attacks. Change management, such as IT system upgrades or data transfers, have been found by the FCA to be the single highest cause of failure and operational disruption.
In the three months to December 2019, there will be further papers on retirement outcomes and independent governance committees. At some point during the year, also on treating customers fairly, there will be another financial lives survey, and additional guidance on vulnerable customers. There will also be a consultation on the prudential regime for investment firms, and a policy statement on general insurance value measures reporting.
For the first time, the FCA will include in its annual report in July 2019, a statement on perimeter issues. In recent years, the FCA has been criticised for failing to act in some areas, where in fact it has no remit to act. Cryptoassets would seem to merit a possible mention here.
Early in 2020, the FCA will publish a discussion paper reviewing its principles and rules, to future-proof its regulatory work. This priority is connected with its discussion paper last year on the Duty of Care; and with aspirations for a machine readable Handbook and machine executable regulatory reporting.
The future of regulation is the last of the FCA’s eight cross-sector priorities. The second half of the business plan focuses on market sector priorities: investment management; retail lending; pensions and retirement income; retail investments; retail banking; general insurance and protection; and wholesale markets.
In the interests of space, we focus here on just one of these sectors: the wholesale markets. In addition to the work on market abuse, MiFID II, Prospectus Rules and data access in wholesale markets mentioned above, the FCA will this year continue its work on the withdrawal of LIBOR at the end of 2021, publishing findings from its September 2018 Dear CEO letter.
For Securitisation Regulation and the Amendment to the Capital Requirement Regulation, the FCA is focusing on weaknesses such as transparency in securitisations and the alignment of interests between issuers and investors. The FCA may amend its Handbook to implement EU Covered Bond legislation. From 1 January 2020, the European Single Electronic Format for corporate reporting will be in place.
And at a time to be determined by Brexit, the FCA will assume oversight of trade repositories, credit rating agencies and securitisation repositories. Finally, the FCA plans to consult on changes to the Listing Rules to facilitate Standard, rather than Premium, Listing of Exchange Traded Funds and considering how to improve retail investors’ access to debt markets.
These FCA priorities and selected EU and UK financial services developments, can be viewed pictorially in our infographic timeline.