Your guide to this week in regulation

Gavin Stewart Gavin Stewart

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

This year the FCA’s Business Plan was published on the same day as its Annual Report, and other documents, including updates on particular workstreams and the independent review recommendations. There is a considerable backstory to regulators’ attempts to be accountable, as well as questions around the right arrangements for the future. Last week I explored some of these aspects in a short series of posts.

This week’s other items, on London Inter Bank Offered Rate (LIBOR) and open-ended investment funds, are both joint efforts between the BoE and the FCA, and they illustrate the growing trend towards collective action. The first of these is longstanding, but the funds’ review is new and is additionally significant in the explicit involvement of the Financial Policy Committee. We should expect more initiatives like this in the future.


FCA’s new Business Plan

The Financial Conduct Authority (FCA) has published its 2021/22 business plan, setting out its priorities for the year ahead.

In summary, the FCA intends to become more innovative, assertive and adaptive.

This will require significant changes to its own operations and its approach to regulation, as it aims to become an effective data regulator.

Its priorities are summarised across consumer markets, wholesale markets, and cross-market issues.

You can also read our detailed reaction here.

Read more:

Business Plan 2021/22 | FCA →

Our Annual Report and Accounts 2020/21 | FCA →

FCA publishes workstream updates

The FCA has published updates for four key workstreams delayed because of COVID-19. I encourage firms to reassess their own priorities in light of this announcement where applicable:

  • Assessing suitability review (ASR 2) – the FCA has confirmed it has decided not to continue planned work on ASR 2 in 2021/22 to allow it to focus on other priorities
  • Diagnostic review of business models – the FCA resumed this work in late 2020 and identified indicators of business models that may benefit from consumers not paying debts, and have embedded its methodology and findings into wider business model analysis. Therefore, the FCA is not undertaking further work at present
  • Review of rules extending SME access to Financial Ombudsman Service (FOS) - the FCA has confirmed it's delaying the start of the review to allow inclusion of upcoming developments with SME complaints. It will assess this position by April 2023
  • De-anchoring remedy for credit cards – the FCA’s planning for its credit card market study remedies post-implementation review has begun. It intends the outcome of this work to indicate whether the need for a de-anchoring remedy remains and whether this would address any new harms

Read more →

FCA Business Plan 2021/22: a new type of regulator What does it mean for your business?
Podcast series Financial services risk and regulation unravelled The latest developments in financial services with industry experts

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.

Consultation on LIBOR transition and derivatives trading

The FCA has published CP21-22 on Derivatives Trading Obligations (DTO) and has proposed modifying the list of derivatives which are subject to DTO and the liquidity analysis supporting it.&

The FCA is proposing to review the requirements of Article 28 and 32 of the UK Markets in Financial Instruments Regulation (MIFER) in relation to DTOs in conjunction with LIBOR transition, and the changes that have been proposed by the Bank of England in relation to Derivatives Clearing Obligations (DCOs).

The consultation paper covers the following topics:

  • Discussing the wider objective of this reform and links to the FCA’s objectives
  • Providing details in relation to approach taken, and the assumption made to perform relevant liquidity analysis
  • Detailed liquidity analysis
  • A list of changes the FCA proposes to make to the classes of derivatives subject to DTO

Read more →

FCA transformation: update from the independent reviews

The FCA has issued an update on its work to date in implementing recommendations from the independent reviews into its regulation of London Capital & Finance and the Connaught Income Fund.

The FCA particularly highlights its progress in strengthening the authorisations ‘gateway’— robust supervision, and enforcement of high-risk firms and countering fraud and scams.

As a result of these changes, the FCA highlights that one in six firms applying for FCA authorisation in the year to March 2021 were refused, rejected, or withdrew their application. In the same period, the FCA opened over 1,700 supervisory cases involving scams or higher-risk investments.

Read more →

Joint review of open-ended investment funds

The Bank of England (BoE) has published its conclusion to the joint review with the FCA on open-ended investment funds and the risks posed by their liquidity mismatch.

They have presented a suggested framework for how a liquidity classification framework for funds could be designed, as well as considerations around the calculation and use of swing pricing. Recognising the global nature of asset management and key markets, the purpose of the framework is to guide the FCA and BoE’s engagement with ongoing international work on open-ended funds.

The Financial Policy Committee has fully endorsed these conclusions. It recognises that further technical work is needed to consider how the principles could be applied, and a number of operational changes would need to be addressed before any final policy could be designed and implemented.


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