Originally due in November, the Regulatory Initiatives Grid was pushed back by the regulators to include changes from the Edinburgh Reforms. Covering 144 initiatives, the new edition is more user-friendly with interactive dashboards, search functions and a downloadable Excel version. This makes it easier to see relevant information by sector, theme or impact on firms, among others and moves it from a useful reference document to an interactive tool for ongoing use.
Despite the volume of initiatives, there are few surprises along the way, with just 41 new entries (three of which are high impact covering crypto-assets, Solvency II and wholesale cash). According to the regulators, there are 10 key initiatives:
At a glance, this seems like an odd selection, but looking at the grid more broadly it appears more policy-driven than ever before, with few reactive items. There are a few recurring themes, such as the Edinburgh Reforms, environmental, social and governance (ESG) and a move towards Net Zero.
The Regulatory Initiatives Grid covers a number of initiatives within the Edinburgh Reforms, which aim to establish the UK as an attractive and competitive financial environment post-Brexit. This includes the Payment Services Regulations reviews, updates to Solvency II, work on the UK funds regime and the upcoming stablecoin consultation. Potential changes to the Senior Managers and Certification Regime were a surprise under the Edinburgh Reforms, and a call for evidence is due this quarter – although any changes will probably be a relatively light touch as it's seen to be one of the more successful regulatory approaches in recent years.
Read more about the Edinburgh Reforms.
The government aims to turn the UK into the world’s first Net Zero-aligned financial centre. Supporting initiatives include the pending update to the Green Finance Strategy, due by the end of the first quarter. Previous themes looked at capturing opportunities in green finance, mobilising finance for the UK’s energy sector, greening the financial system and leading internationally. However, the UK’s ESG landscape has evolved since the previous strategy. While the key themes will no doubt remain the same, we can expect some shifts in emphasis which can have a knock-on effect on the direction of subsequent regulation.
The Pensions Regulator will assess compliance with climate-related requirements, within the first half of the year, looking at statements of investment principles and implementation reports.
The International Sustainability Standards Board (ISSB) will also finalise its climate-related disclosure standards this year, although the timeline is currently fairly fluid. The Financial Conduct Authority (FCA) will explore how these standards could apply to listed companies, potentially replacing Task Force on Climate-related Financial Disclosures (TCFD) disclosure requirements.
Looking at ESG more broadly, there are recent consultations on governance, remuneration, incentives and training, and enhancing proportionate remuneration for small firms. Regulators are also looking at diversity, equity and inclusion, with a joint consultation paper due in the first half of the year, and guidance due for pension scheme boards in the first quarter of the year.
Read more about sustainability disclosure requirements.
There are a few other initiatives from the Regulatory Initiatives Grid that are worth a mention. Firstly, there’s the Prudential Regulation Authority (PRA) led approach to improve data collection. This is predominantly to help regulators improve reporting processes for banks using blockchain. Mortgage guidance is also due by the middle of the year – to help borrowers during the cost-of-living crisis. Similar approaches have followed the same mould as pandemic lockdown measures, so banks could potentially adapt pre-existing mortgage processes.
The regulators have also pushed back some initiatives, such as the Sustainability Disclosure Requirements (SDR) policy statement (now due in June), a paper on critical third-party oversight (now in the second half of 2023) and the final report on the study of credit reference agencies (now due in the third quarter).
As the cost-of-living crisis continues to unfold, we can expect more reactive regulations in the second half of the year, which could also shift the timescales of some lower-priority items.
For more information on regulatory changes, contact David Morrey.
