Expert comment on Financial Conduct Authority (FCA) Business Plan 2017/18 and Mission 2017 – Grant Thornton UK LLP
Commenting on today’s release of the FCA’s 2017/18 Business Plan and Mission 2017, David Morrey, Partner at business and financial adviser Grant Thornton UK LLP, said:
”Whilst there were no significant new themes or surprises on prior years, the Business Plan indicates an increased focus on innovation and technology - both as a benefit to firms and consumers and also as a risk. The recognition that innovation may outstrip the ability of management to understand how it is impacting customers and markets, or that automated models might exclude customers who do not fit neatly within product algorithms, provide balance on what has historically been a very positive outlook on technology by the FCA. Alongside these risks the Plan commits the FCA to review cyber security at every high impact firm that it regulates within the next year. The Plan also confirms that Project Innovate and the regulatory sandbox will continue at pace and that the authority will also look at how firms can automate AML and other checks to reduce the cost of regulatory compliance.
“Competition also gets greater focus, both the risks to consumers of too little competition as well as the risk that firms will cut more corners to bolster margins which are under pressure from competition or the general economic environment. Sector specific competition analysis is also a feature with wholesale insurance markets and retail investment platforms both flagged for attention.
“Brexit is mentioned multiple times, but anyone looking for insight to what a post-Brexit regulatory environment may look like will be out of luck. The FCA is supporting government as it negotiates Brexit, is committed to high regulatory standards once it happens, and in the meantime will vigorously act to implement the current slate of new EU regulatory changes, including MiFID II and the EU Benchmarking Regulation.
“As in prior years the Plan contains details of upcoming Thematic Review work, however it is notable for the number of areas and issues where it is indicated some work will take place without defining what (or when) that work might involve. For instance, work on remuneration structures is signalled as is a ‘review’ of motor finance. These could be major pieces of work or relatively minor exercises. This perhaps makes this year’s Plan unusually hard to interpret – will the FCA's approach in some of these areas be light touch or heavy? The Plan gives the FCA more wiggle room to adapt its approach as the year goes on than most of its predecessors.”