Building societies are operating today within an increasingly complicated legislative and regulatory environment. As well as the everyday business of the society, firms face growing competition from other financial services providers, alongside changing pressures and priorities from regulators, consumer groups and customers. To help keep you ahead of the game, Walker Morris Partner Louise Power, a specialist in retail financial services litigation and non-executive director of a local building society, highlights below some of the key legal and regulatory ‘hot topics’ for building societies to watch out for in the coming months.

  • Senior Manager and Certification Regime

    The new regime for strengthening accountability applies to building societies as well as others within the UK banking sector and came into effect in March 2016. It is anticipated that the drive for individual accountability will be a recurring theme for UK regulators in the months to come.

  • Mortgage Credit Directive

    The MCD applies to first and second charge mortgages. Its aim is to ensure that all consumers who purchase a property, or who take out a loan secured against their home, are adequately informed and protected against the risks. It also introduces minimum harmonisation requirements on lenders across the EU and introduces additional requirements to ensure that treating customers fairly outcomes are achieved specifically for vulnerable customers. The MCD came into force on 21 March 2016 and the FCA has published key resources and guidance here:

  • Lending activities

    The Prudential Regulation Authority has opened a consultation on its approach to its supervision of building societies’ treasury and lending activities. The consultation can be accessed here and seeks responses by 4 July 2016.

  • 2016 stress test

    The Bank of England has published its ‘Key elements of the 2016 stress test’ and guidance for participating firms, in accordance with its ongoing commitment to stress testing the UK banking system.

  • Banking Standards Board Review

    The Banking Standards Board published its first annual review, which can be accessed here, on 8 March 2016. The review looks at the BSB’s work done since it was established in April 2015; identifies key themes that emerged from its pilot assessment of ten major retail financial services providers; and confirms the BSB’s priorities for the coming year.

  • Retail banking market investigation

    The Competition and Markets Authority (CMA) is investigating the supply of personal current accounts and of retail financial services to small and medium-sized enterprises and has published provisional findings which identified a number of competition problems. So far, the CMA has suggested possible measures to help customers better understand and manage their use of overdrafts; requiring firms to offer grace periods during which customers can take action to avoid unarranged overdraft charges; requiring firms to give customers a choice on whether to have an unarranged overdraft facility or not; and measures to limit maximum unarranged overdraft charges each month. The CMA aims to publish its final report in the summer, shortly before the revised August statutory deadline.

  • Credit card market study

    The FCA published an interim report in November 2015, which found that competition in the credit card market is working “fairly well” for consumers. The final report is due in spring 2016.

  • Payment Systems Regulator

    The new PSR is currently conducting two market reviews in respect of the supply of indirect access to payment systems and the ownership and competitiveness of infrastructure provision. The PSR expects to publish final reports in May.

  • ‘Brexit’

    June 2016 has been confirmed as the date for the referendum on the UK’s continued membership of the European Union. Parliament has published a new landing page bringing together information and analysis on the subject.

  • ODR

    With the European Commission establishing an online dispute resolution (ODR) service for consumers shopping online anywhere within the EU; the United Nations Commission on International Trade Law establishing a working group for online dispute resolution in cross-border e-commerce transactions (both business-to-business and business-to-consumer); and the UK civil courts service looking to develop an online court, all businesses, including building societies and others in the retail financial services sector, will need to get to grips with ODR soon.

  • Electronic Signatures

    E-signatures in cross-border transactions are currently governed by the E-Signature Directive, but the Electronic Identification Regulation (EU/910/2014) will come into force on 1 July 2016, repealing the E-Signature Directive. UK legislation will need to be amended, but detail surrounding the new regime is, as yet, unclear.

  • Asset Management Market Study

    Summer 2016 should see an interim report as to the outcome of the FCA’s review of the retail banking, general insurance, fixed-income instruments, currencies and commodities markets.

  • Payment Accounts Directive

    The PAD is intended to enhance transparency and comparability for consumers in respect of payment accounts. It makes it easier for consumers to compare fees charged by building societies and other retail financial service providers, it facilitates consumer switching of payment accounts and it entitles all EU consumers to open a payment account that enables them to perform essential functions like receiving salary and paying bills. The PAD will be implemented into UK law by 18 September 2016 and the FCA plans to publish proposed changes to its Handbook and related guidance in summer 2016.

  • Data protection

    The EU’s General Data Protection Regulation was agreed shortly before Christmas 2015. It will effect a substantial overhaul of the existing EU data protection regime, including greater accountability for data controllers, enhanced rights of data subjects and tougher enforcement powers for regulators. Although the Regulation will not come into force for two years from its publication, businesses should start reviewing existing procedures and policies at the earliest opportunity.

  • Cybersecurity

    Although no new legislation or regulation is foreseen for this year, the issue of cybersecurity will remain at or near the top of compliance agendas. Last autumn’s security breaches at Ashley Madison and Talk Talk have highlighted the reputational consequences that can follow a breach and, of particular concern to lenders, conveyancer hacking is now just as live a risk as money laundering and mortgage fraud.

  • EU reforms

    Also on the horizon for 2016 are the EU’s Market Abuse Directive; the requirement for those selling packaged retail investment and insurance-based investment products (PRIIDs) to provide further key information documents; and the coming into effect of certain aspects of the European Market Infrastructure Regulation, which could affect smaller retail financial services providers’ fixed-rate mortgage offering.