Much debate has ensued as to the severity and duration of the economic fall-out for UK plc from the COVID-19 situation; most recently from the Bank of England's Chief Economist, Andy Haldane. Whatever your view, it is difficult to identify any near-certainties in the current climate. One, however, is that the regulatory agenda will continue to see knock-on effects if the government determines that further tapering of the various temporary measures is necessary, such as for mortgage holidays and credit payment freezes.
Meanwhile, as the deadline for agreeing an extension to the transitionary period for Brexit passes, it is perhaps not a coincidence that we see, this week, a number of regulatory updates with a distinctly European flavour. Three of our articles serve as an important reminder of the varying degrees of discretion that the UK government and the regulators will apply in setting legislation and their future supervisory approach, respectively.
In the middle of this complexity, many firms may be relieved to see the Financial Conduct Authority's (FCA) further delay to certain aspects of its work (our first article), most recently, the deadline for assessments of fitness and propriety of certified persons extended to 31 March 2021 for solo-regulated firms under the Senior Managers and Certification Regime (SM&CR).
In light of COVID-19, the FCA has announced further delays to its planned work for 2020. On 25 June, the FCA changed the dates for the following publications:
The FCA also highlighted delays to implement rules covering motor finance, pension transfer advice and others.
The PRA has updated its statement on the regulatory treatment of the UK Coronavirus Business Interruption Loan Scheme (CBILS) and the UK Coronavirus Large Business Interruption Loan Scheme (CLBILS) to provide clarification on the application of credit risk approaches for firms in three instances:
The FCA has published a discussion paper (DP20/2) that sets out the technical details of the Investment Firms Directive (IFD), and the Investment Firm Regulation (IFR) and its interpretation of these requirements.
While the IFD and IFR are not applicable to the UK, due to its exit from the EU, the UK was a member state at the time of drafting and was heavily involved in the discussion and consultation of the regime. As such, the FCA is supportive of the regime’s intention to better align standards with business models and sources of harm.
The FCA is seeking feedback on the design of a similar prudential regime for UK investment firms before 25 September 2020.
The European Banking Authority (EBA) published its final guidelines on information and communication technology (ICT) and security risk management on 28 November 2019. All credit institutions, investment firms and payment service providers are expected to comply with these guidelines from 30 June 2020.
As a result of increasing digitisation in the financial sector, firms are more vulnerable to internal and external ICT security risks. The EBA guidelines set out expectations on the mitigation and management of such risks.
The FCA has confirmed that it will apply reasonable supervisory flexibility regarding the implementation of these guidelines, due to the challenges posed by coronavirus. In current times, the FCA encourages firms to focus on the provisions within the guidelines relating to information security, ICT operations and business continuity.
Meanwhile, the FCA is consulting on new requirements for operational resilience, with final rules to be published in early 2021. The rules are expected to provide further information on the EBA guidelines and how these relate to the FCA’s operational resilience policy.
The House of Commons has published a written statement by Chancellor of the Exchequer, Rishi Sunak, on the UK’s approach to implementing regulatory reforms before the end of Brexit transition period. Under the terms of the Withdrawal Agreement, the government will implement EU legislation that comes into force before the end of the transition period on 31 December 2020.
The government is intending to exercise discretion when implementing aspects of legislation that do not come into force until after the end of the transition period. The statement provides further details on timelines and those aspects of legislation to be implemented, including among others:
To discuss these or how any other regulations might impact your firm please get in touch.
