opinion

COVID-19 regulatory spotlight: PRA business plan 2020/21

Gavin Stewart Gavin Stewart

This is the latest in a series of blogs looking at the impact on regulators with the intention of shedding light on a particularly significant regulatory event.

When the PRA Business Plan came out last Thursday, I wrote that it was far more of a "business as usual" document than the Financial Conduct Authority (FCA) equivalent. Another important difference is that the Prudential Regulation Authority (PRA) is essentially a supervision-led regulator, whereas the FCA is policy-led. This is part-dictated by the latter's much wider remit but is also a choice.

The two differences are of course linked, and the PRA's approach, of having a named supervisor for each firm, in practice gives it much more flexibility and greater knowledge of its regulated population. In turn, this means it can, on one hand, identify and fix COVID-19 problems quicker, and on the other make better progress against its longer term priorities.

Taking these in turn and looking at these in the round and how they will be affected by COVID-19:

Robust prudential standards and supervision

This is an intentionally flexible priority, enabling the PRA to make risk-based decisions with maximum ease. COVID-19 will inevitably be front and centre here.

Adapt to market changes and horizon scanning

This is a continuation of last year's ambitious priority and the horizon scanning element was always a reach. Climate change and technology will pause as priorities but are likely to accelerate towards the end of 2020.

Financial resilience

With 2020 stress tests cancelled and s166 work paused, this will be played out almost exclusively through the crucible of COVID-19. References to taking forward other strands are likely to prove optimistic.

Operational resilience

As soon as possible, this will rocket up both domestic and international agendas. Firms too will view this as a critical part of their COVID-19 recovery plans

Recovery and resolution

This is another priority that will be initially paused, as resources are devoted to helping the FCA, but then accelerated once the COVID-19 crisis has begun to recede. In particular, the "too big to fail" conundrum will demand renewed international effort

Competition

The HM Treasury (HMT) letter (Nov 2019) quoted in the Plan already seems a lifetime ago. At some point competition will again become important, but the safety and reliability of financial firms, products and services will take precedence for the foreseeable future

EU withdrawal

Work on this will be crowded out by the imperatives of the COVID-19 crisis. 

Efficiency and effectiveness

As with previous crises, COVID-19 will reshape understanding of what these look like. Some of this will surprise but it's a safe bet that data collection and analysis (referenced in the Plan) will become ever more important

Regulated fees and levies: Rates proposals 2020/21 (9th April 2020)