Your guide to this week in regulation

Gavin Stewart Gavin Stewart

In our weekly round-up of UK financial services regulation, Gavin Stewart summarises the latest announcements and developments. Be sure to subscribe to receive our updates in your inbox every week.

I posted last week on the Prudential Regulation Authority’s (PRA) work to simplify the prudential framework, and it’s worth placing these efforts alongside its thematic findings on collections. The PRA will reduce and simplify where it can, but ultimately will want to keep standards high. The same principle is likely to apply to the Financial Conduct Authority’s (FCA) consultation on MiFID amendments, although with the new ExCo team they may have a greater appetite for change.

Elsewhere, the FCA’s consultation on tightening financial promotion rules has an element of shutting the stable door late on a problem that has been evident since the regulator’s earliest days. The cyber item indicates how embedded in the regulatory agenda this issue is becoming, especially when set against the landscape of operational resilience.

This week's update covers:

Simplifying the prudential framework for non-systemic banks and building societies

The PRA acknowledges that currently it applies broadly the same prudential regime to all banks and building societies it regulates, despite their diversity of size and activities. This can result in some smaller firms experiencing over-complex requirements and expectations relative to the size and nature of their business.

As such, the PRA has published a discussion paper that explores options for the development of a simpler prudential framework for smaller banks and building societies.

The paper invites firms and practitioners to provide their views on the potential options and to help the regulator understand preferences and wider implications.

Comments are required before 9 July 2021.

Read more→

PRA’s findings from internal audit review of collections

The PRA have published a letter to chief risk officers of 42 non-systemic UK deposit-takers; setting out findings of the internal audit review of collections that commenced in November 2019.

The review found that 20% of the firms require significant strengthening in the collections function. Areas needing improvement are:

  • Policy and process documentation
  • Controls over collections activities
  • Collections capacity planning and training
  • Alignment to regulatory reporting requirements
  • Collections MI
  • Board sightedness of forbearance levels

The PRA is aware that many firms are reviewing collections processes and controls and has confirmed that it will continue to monitor firms’ collections functions in light of the current circumstances.

Read more →

Regulation in the time of COVID: fincrime and Brexit Find out more

UK regulatory handbook 2021

An indispensable guide to help financial institutions in each of the banking, capital markets, insurance and investment management sectors understand the most important regulatory changes.

FCA consults on conduct and organisational requirements under MiFID

The FCA has published a consultation paper on the changes it is considering to UK MiFID conduct and organisational requirements.

The consultation is the first output of the work the FCA is carrying out together with the treasury on capital markets reform. Two further consultation papers are expected. This initial paper covers changes to two areas in UK MiFID organisational and conduct rules: research and best execution reporting.

Responses and comments to the consultation paper should be submitted by 23 June 2021.

Read more →

FCA insights on cyber co-ordination

The FCA has published a report on the board overview and insight from its quarterly Cyber Co-ordination Group (CCG) meetings on current cyber risks and firms’ practices for responding to them.

The primary objective of the CCG meetings is to enable firms to share knowledge and discuss good practices in safeguarding themselves against cyber threats.

The key insights discussed in the report include:

  • Some of the major cyber threats and risks that CCG member firms have faced
  • Zero trust security models and artificial Intelligence are some of the emerging fields within cyber-security
  • More people working remotely has put increased strain on cyber-security teams, so systems and controls need to be re-evaluated
  • Increased challenges caused by ransomware, supply chain security and insider threats
  • CCG members shared their own mitigation strategies for the unique challenges caused by fourth-party supply chain and cloud service provider (CSP) risks
  • Members also identified shared assurance models as potentially promising improvements to the way firms assess supply chain risk

Read the full report →

Strengthening financial promotion rules

The FCA has published its discussion paper (DP21/1) on strengthening its financial promotion rules for high-risk investments and firms approving financial promotions. This follows the FCA’s recent interventions to address harm from such investments.

It seeks views on three areas where the FCA considers that change could be made to protect consumers from harm:

  • The classification of high-risk investments to determine whether more types of investments should be subject to marketing restrictions
  • The segmentation of the high-risk investment market and what improvements can be made to risk warnings
  • The responsibilities of firms which approve financial promotions, and whether there should be additional requirements for these firms to continuously monitor financial promotions

Responses are requested before 1 July 2021.

Read more →

To discuss these or how any other regulations might impact your firm please get in touch.