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Financial services: key topics and trends for the rest of 2022

Alex Ellerton Alex Ellerton

As we sail into the second half of this year, the UK regulatory waters look ever choppier for financial services. Alex Ellerton explores the cross-sector priorities around Consumer Duty, ESG, macroeconomic uncertainty, and ongoing regulatory change.

Change – this has been the constant theme of the year. Regulators are pushing on full steam ahead and firms must now adapt quickly to a shifting sea of new developments. Looking back on lessons from 2021 will certainly help, but the first half of 2022 has set the tone and direction for the fluctuating regulatory landscape.

We have identified the cross-sector trends for you to take into the latter half of 2022. To stay on top of the latest developments and hear about our insights first, sign up here.

Consumer Duty

The new Consumer Duty stands out as one of the most significant developments in consumer regulation in recent years. For the first time, it provides the FCA with a single regulatory standard that can be applied across the breadth of the regulated financial services sector - regardless of product or service, and to all participants in the distribution chain.

Firms must overcome several obstacles to comply with Consumer Duty - the wide scope of the obligations and the resulting impact will impact many parts of the business model. The challenges around adapting to this new regulation will unveil the strengths and weaknesses of your change response.

Find out more about your incoming Consumer Duty obligations

Macroeconomic uncertainty and inflation

Many factors are feeding into the global macroeconomic environment. Price volatility and increased inflation driven by supply shocks, which were both initially considered transitory, are here to stay and move into the longer term.

It's been a long time since we have seen this level of inflation – carrying with it a cloud of uncertainty. The cumulative impact of Brexit, the pandemic, and unpredictable geopolitics will have a significant impact on the UK financial services sector. The cost-of-living squeeze, among other things, will affect firms and vary their earnings.

While the impact of these global headwinds and sustained inflationary pressure will vary depending on each sector and a firm's business model, firms must plan accordingly to maintain operational and financial resilience.

ESG, sustainability, and climate

The attention on ESG remains unwavering among all industry stakeholders. For financial services firms, ESG, and sustainability programmes are full of risk and opportunity, but as this is a new space many firms are still unsure of what it means for them. Building ESG frameworks help with answering some of those core questions.

Regulators have put forward draft proposals and plans to effectively capture a firm’s ESG profile – most notably around disclosures, but there's a growing focus on other elements, such as biodiversity and nature-related reporting. Firms must allocate sufficient expertise and resources to keep up with regulatory changes. 

Get guidance on sustainability changes, opportunities, and risks

Regulatory change

Regulators are now full throttle ahead. Firms are struggling to pace with the stream of resources – reports, consultation and discussion papers, draft proposals, etc, – that are being published.

Supervisory bodies have continued to remind financial services firms that they must maintain the integrity of their regulatory returns. This includes looking at remediation plans, self-assessments, operating models, control environments, and independent assurance. Expectations are only growing more stringent.

Stay in the loop of how the regulatory winds change with our weekly update

How can you navigate this new landscape?

To successfully move through this unchartered territory, firms must prepare well and leverage all their options.

There's an array of resources available for financial services, but it can be difficult to find something that answers most, if not all, the right questions.

To help you, we've updated our 2022 UK regulatory handbook to match the latest regulatory changes. It's a comprehensive guide to cross-sector priorities, as well as the incoming challenges specific to banking, investment management, insurance, and capital markets.

You can also access our webinars and risk and regulation podcast to supplement these insights.

To learn more about the evolving challenges for financial services and find the right team to support you,  get in touch with Alex Ellerton.