The FCA’s business plan makes interesting reading as it sets out their priorities for 2020/21.
Chief amongst them is the continued focus on treating customers of regulated financial institutions fairly. The FCA has for a while had a big eye on customer treatment and initiatives like Request to Pay, Conformation of Payee and GDPR have come out of it.
The FCA also focuses on vulnerable customers. With the new Governor of The Bank of England, having previously headed up the FCA and having a strong banking background we can see he influence pervading all areas of financial regulation. Time will tell if Chris Woolard the interim head of the FCA will continue this theme as his background is more in the regulatory world rather than coal face banking.
He recently said:Chris Woolard
In a matter of weeks, coronavirus has altered the UKs financial landscape dramatically.
At times like this it is more important than ever that the FCA leads the way on the protection of consumers, firms and the markets.
Our Business Plan recognises the impact of coronavirus on the financial services industry, while looking forward at how we transform the FCAs operations in future.
This concern for customers is no more evident than it is now in the crisis we are in. There is a strong influence in all the regulators work of focusing their attention on vulnerable people and ensuring they are protected.
In the medium term the FCA have decided to focus on four key areas:
- can rely on safe and accessible payments to receive their pay or benefits, settle bills and access cash
- do not get into unaffordable debt and are treated well if they do
- can make effective investment decisions about their savings, and are not exposed to risky or poor value products
- are offered fair value products in a digital age and are not at risk of being treated unfairly in the pricing and other terms they receive
In pursuit of their desire to protect customers in the industry, both individuals and corporate, they have indicated that they will be reviewing their systems and processes to ensure information is shared across the organization and that we are safeguarded against unacceptable firms are stopped and removed from the landscape.
The objectives driving the FCA’s activities during the pandemic are:
- keeping markets functioning in orderly fashion;
- supporting the operation of government schemes;
- supporting consumers with the immediate shocks created by the crisis;
- maintaining public access to essential banking services; and
- protecting the most vulnerable in society.
The FCA’s stated external priorities for 2020 to 2023 are:
- enabling effective consumer investment decisions: products designed to meet customer needs; a campaign on to help consumers make better investment decisions; and higher standards of governance in retail investment firms.
- ensuring consumer credit markets work well: easier consumer understanding of product range and features; avoiding consumers becoming over-extended; increased access to fair and affordable credit; and early consumer engagement with debt advice.
- making payments safe and accessible: greater focus on payment service providers’ anti-financial crime systems and controls, swift action where firms fail to meet safeguarding and other regulatory obligations; and preservation of payment choice (including access to cash).
- delivering fair value in a digital age: consumers are confident that they are getting appropriate quality and service for the price; ethical use of data and algorithms to price services and prevent bias or discrimination; and firms take extra care when dealing with vulnerable customers.
KPMG in their blog summarized the plan as follows:
The FCA’s guiding principle remains to prevent or reduce harm to consumers and markets, but its priorities are being reshaped given the medium to longer-term impact of COVID-19 on the UK and global financial markets. Some of the regulatory guidance that has been introduced in response to the pandemic – in particular, those statements concerning vulnerable customers – might continue post the pandemic. The FCA also notes that it may need to update its Business Plan if the impacts of and lessons learned from COVID-19 are significantly different to those that are currently observed.
The Plan is heavily outcomes-focussed and there is less sector-specific detail than in previous years’ business plans (in part because the FCA has only recently issued its Sector Views).
The plan highlights that the FCA will work with government and stakeholders to shape a future regulatory framework with the UK outside of the EU and using the lessons learned from operating the current framework. Brexit is partially done and remains a key factor in the future shape of UK rules, but provides greater freedom for the UK regulators. The plan states that the current regulatory framework is too focused on rules and process, and not enough on principles and outcomes. It sees too many resources today devoted to redress and remediation, and not enough to empowering consumers to take good decisions and regulatory action to prevent harm and safeguarding consumers’ financial wellbeing.
The FCA’s budget will increase by 2%. In addition, £15m will be spent on EU withdrawal issues over the next year and £30m will be spent over three years on the FCA’s operational transformation. Recognising the impact of COVID-19, the FCA is freezing fees paid by the smallest 71% of firms next year and is giving small and medium firms until end-2020 to pay.
The Payments Business View
The plan is a robust one which will see an overhaul of operations and processes at the FCA. The plan is long on aspiration and honourable intentions, but short on detailed plans and initiatives. The plan as it is published is more like a mission statement, and that’s no bad thing, but there are a lot of people in the payments world who will be waiting anxiously for the detail, the actions.