Your guide to this week in regulation

Gavin Stewart Gavin Stewart

Welcome to our weekly round-up for UK financial services regulation. Read on for a summary of key announcements and developments, and be sure to subscribe to receive our updates in your inbox every week.

This week’s update is inevitably dominated by COVID-related announcements - a pattern that will continue for the duration of the outbreak. One challenge for firms will be how to triage and process the content and its implications, both immediate and long-term. In thinking about these, firms shouldn’t underestimate the importance of optics, even where they concern matters not specific to financial services.

A recent example where this applies is the FCA’s Friday statement on the responsibilities of senior managers for work-related travel. The regulator has seen examples of firms operating in a way they feel contravenes the spirit, if not necessarily the letter, of the government’s guidelines and has decided to send a message. It is likely that the FCA will also read across from such instances and infer that the firms in question may be more likely than others to not comply with financial regulations.

The FCA is on record about its intention to take account of non-financial misconduct and the pandemic is an unprecedented and unwanted test ground for this approach.

This week's update covers:

Bank of England (BoE) announces measures to address the challenges of COVID-19

On 20 March 2020 the BoE and PRA announced measures aimed at alleviating operational burdens on PRA-regulated firms and Bank-regulated financial market infrastructures, noting their delivery of critical functions to the economy.

These measures included four key areas:

Cancellation of the Bank’s 2020 annual stress test for the eight major UK banks and building societies to allow them to focus on meeting the needs of customers and businesses

Amendments to the biennial exploratory scenario (BES) timetable

BoE continues to engage with relevant domestic and international bodies to consider the potential interaction of COVID-19 with IFRS9. It will seek to provide further updates in the coming weeks

Postponement of the joint Bank / FCA open-ended funds survey until further notice.


FCA publishes information for firms on COVID-19

The FCA has confirmed that it will take necessary steps to ensure that consumers are protected and that markets continue to function well during this period of uncertainty. It expects firms to take reasonable steps to ensure that they are prepared for the potential challenges ahead posed by COVID-19. This includes managing financial resilience and actively managing liquidity.

To date, the FCA has provided guidance on SM&CR responsibilities, regulatory change, impact on consumers, insurance products, mortgages, unsecured debt products, access to cash, operational resilience, market trading and reporting. The FCA has also emphasised the need for firms to be clear and transparent with consumers.

In light of the current challenging circumstances, the FCA has confirmed that it will delay consultation papers, calls for input and publications. It is working closely with the Government, the Bank of England and the Payments Systems to create appropriate guidance for firms which is likely to evolve as the coronavirus situation develops. All updates are to feature on the FCA’s COVID-19 information page accessible via the link below.


FCA explains key workers in the context of financial services

Whilst firms are considered best placed to determine who is essential for the provision of financial services, the FCA has provided some examples including those essential to:

  • Senior management functions captured by the Senior Management Certification Regime
  • running online services
  • providing customer services and responding to consumer queries
  • processing payments and distributing cash
  • facilitating and administering the repayment of debt.

The FCA suggested that firms consider the necessity of issuing their key workers with letters that may be provided to schools and highlighted the importance of following Government guidance.


FCA sets out expectations for insurance firms in response to COVID-19

The FCA has set out its expectations of how general insurance firms should treat their customers when responding to the pandemic. Firms are reminded of the importance of operational resilience and business continuity planning in the face of such events. There is also emphasis on ensuring that customers are not disadvantaged by events that are well outside of their control. Key examples include:

  • Not using changes in circumstances, such as working from home or commuting by car, as a reason to decline claims
  • Ensuring that both new and existing customers are aware of any existing policy exclusions that relate to COVID-19
  • When making any changes to products, or suspending products, in order to limit firms’ own exposure to COVID-19-related risks, ensuring that customers (especially vulnerable customers) do not suffer detriment as a result.

The ABI has already responded to this guidance with a number of commitments from its member firms.


FCA’s guidance for mortgage providers on COVID-19

The FCA has published guidance for mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators. It explains how firms should treat customers who require payment holidays or are subject to repossession proceedings.

Firms should grant up to three months of payment holidays to customers who require them, with no additional charges or impact to the customer’s credit score. Firms should communicate clearly what (if any) consequences a payment holiday may have on the mortgage term or total amount payable. Firms should not commence or continue repossession proceedings even where a possession order has already been obtained.

This guidance only applies during the exceptional coronavirus emergency and will be subject to review and possible extension in the next three months.


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

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