FCA Business Plan: the cross-sector (corporate) priorities

Gavin Stewart Gavin Stewart

Today the FCA launched its business plan for 2019/2020. Much like previous business plans interpreting its impact on both firms and sectors can be quite confusing.

The FCA provides much of the detail for of openness and transparency – but the plan remains, in general, poorly understood. Part of the problem, is that the majority of the FCA staff spend their time on the normal work of regulation and on dealing with events, activities that rarely feature in the plan.

Navigating the Regulatory landscape

Following the release of the latest FCA business plan, our regulatory team unpick the findings and main areas of focus for the regulator over the next 12 months and what this means for your business.

Here are the seven key takeaways from this year’s plan and an assessment of how they fit with the FCA’s cross-sector (corporate) priorities for the year ahead.

1 Culture and governance

A variation of this has been a priority virtually since the first years of the FSA in the early 2000s. SMCR is a key feature of the current approach, and while the FCA has partly played down the “stick” element of the regime, it’s clear from Mark Steward’s recent speech that SMCR will be a foundation of enforcement action for the foreseeable future. Meanwhile, the FCA’s efforts to collaborate with the industry to explore the role of ‘purpose’ in culture – the “carrot” element if you like - deserves support.
Assessment: This area is probably the most important priority for any conduct regulator.

2 Operational resilience (OR)

This was also a corporate priority last year but now carries more weight, given impetus by the joint PRA/FCA Discussion Paper. OR is one of the rare areas that ticks every box – partly event-driven but with heavy policy input, high profile in terms of public rhetoric, and resource intensive for regulator and industry alike. It helps that he PRA care about this at least as much – from cyber to outsourcing to the cloud.
Assessment: OR will be a major priority for both regulators over the coming years.

3 Financial crime and anti money laundering

Another ever-present priority and increasing in importance, partly in response to external pressures. These include last year’s FATF recommendations and next year’s implementation of AMLD5. As with some other areas, such as OR, the FCA is constrained by the relatively limited specialist resource it has in house. It’s worth noting that the FCA, collaboratively with the industry, is actively exploring RegTech solutions to FinCrime.
Assessment: FinCrime is definitely a growth area for FCA activity.

Download our summary of the FCA Business Plan rich text with download pdf

4 Fair treatment of existing consumers

One of the FSA’s first papers, commissioned in the last millennium, was titled “Treating customers fairly after the point of sale” and this has remained an extremely difficult area for regulation. The current activity is partly prompted by the CAB super-complaint that loyal customer are penalised.
Assessment: This is a much more specific priority and, for the moment, seems very policy-focused.

5 Innovation, data and data ethics

As with “Fair treatment”, the activities listed are relatively discreet and policy-focused. Two important differences, however, are that the FCA has just created a Director of Innovation role - presumably to give these important areas more cohesion and impetus, and that there is significant external momentum building, highlighting both the opportunities and the threats.
Assessment: This is another growth area, and its influence should become more pervasive across the FCA’s work than being 1/7 priorities implies.

6 Demographic change

Intergenerational issues and Understanding consumers’ needs are not new in regulatory thinking, but they have so far proved hard to translate in a practical way. As an example, the Financial Lives survey is an important piece of research but is also the latest in a lineage that runs from the Financial capability survey in 2006 to the Ageing population paper of 2017. Vulnerability is a broader issue that firms should expect to hear more about from their supervisors over the coming months.
Assessment: With the exception of vulnerability, this is likely to remain a low key FCA priority.

7 The future of regulation

Of the three areas highlighted here, it would be a welcome surprise if the FCA made concrete proposals on a Duty of Care that could then be openly debated, while the Handbook work is, on one level, part of business as usual. The Perimeter, however, has always been a critical issue, though often deprioritised. 
Assessment: These areas could have a significant impact on firms but only if the FCA chooses to put real weight behind them.

At a sector level, these priorities will have varying levels of importance. Arguably, they will all be relevant to the largest retail banks, but in practice the FCA’s priorities may be different for asset managers and different again for consumer credit firms.

To discuss this year’s FCA Business Plan and how it might impact your sector and firm please get in touch with Gavin Stewart