The FCA has published the latest edition of its regulatory initiatives grid, outlining key priorities for the year ahead. David Morrey looks at the changes and what they mean for the financial sector.

The seventh edition of the FCA’s regulatory initiatives grid is now live. With a primary focus on post-Brexit regulation, the grid sets out timelines for implementing the Smarter Regulatory Framework (SRF). This is the primary tool for managing retained EU legislation (REUL), while maintaining a competitive and attractive business environment. Regulators can now move forward with these plans due to the Financial Services and Markets Act (FSMA) 2023, which received Royal Assent over the summer. 

What are the key initiatives? 

There are 125 items listed in the regulatory initiatives grid, of which only 33 are new – mostly relating to SRF or cross-sector priorities. Of those new listings, the majority are currently marked as having a low operational impact for firms, with no high-impact items and a few marked unknown. 

Of the 31 high-impact initiatives listed, which all reflect ongoing work, highlights include: 

  • Basel 3.1 – near-final policy statements due in Q4 2023 and Q2 2024, with final implementation due 1 July 205. 

  • Ring-fencing – parliamentary review of proposed ring-fencing reforms in Q1 2024, and a policy statement due in H2 2024 covering alignment between the ring-fencing and resolution regimes.  

  • Consumer Duty – rules to come into force on 31 July for firms with closed-book products. 

  • Regulation of buy now, pay later – the Treasury (HMT) will respond to its second consultation paper and related feedback (date TBC), and parliament will review the required secondary legislation (subject to parliamentary time). 

  • ESG data and ratings – Code of Conduct due in Q4 2023. 

  • Stablecoins – a second FCA consultation will follow DP23/4, with timings subject to HMT secondary legislation being in place. 

  • Strong and simple regime – a policy statement is due in December 2023 to finalise the scope, liquidity and disclosure requirements. A consultation paper is also due in Q2 2024 on the capital regime (to coincide with the near-final rules on Basel 3.1 and details of the transitional capital regime). 

  • Sustainability disclosure requirements (SDR) final rules have just been published to reduce the risk of greenwashing and create consistent sustainability labels for investment products. 

Sustainability disclosure requirements – what’s changed?
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The smarter regulatory framework 

Due to the range of initiatives within the smarter regulatory framework, this has been added as a separate section and is searchable via the interactive dashboard. Work will be split across different tranches and the regulatory initiatives grid shows timelines for the first two.  

Tranche one reflects ongoing work, including three high impact initiatives: 

  • Reforms to Solvency II – policy statement due in Q1 2024 (in response to CP12/23), with further consultations due in response to CP19/23 on matching adjustments and the related final rules due in Q2 2024. 

  • UK prospectus regime reform – an FCA consultation is due in Summer 2024, based on feedback from its ongoing engagement with the sector.  

  • Wholesale markets review – final policy statements due in Q4 2023 covering the UK consolidated tape, and the FCA consultation on the commodity derivatives regime and transparency for bonds and derivatives. FSMA 2023 has now received Royal Assent and is an integral element to enable the wholesale markets review to move forward.  

Tranche two is broader and covers: 

  • Leverage ratio – reporting changes to take effect from 1 January 2024. 

  • The Payment Services Direct and E-Money directive – to be repealed and replaced (timeline TBC). 

  • Insurance Mediation and Distribution Directives (IMD/IDD) – final rules due in December 2023, expected to take effect from March 2024. 

  • The Packaged Retail and Insurance-based Investment Products (PRIIPs) – to be repealed and replaced, with a consultation due in 2024. 

The Capital Requirements Regulation (CRR) also features heavily in tranche two, focusing on onshoring elements of the regulation into the PRA rulebook, covering capital buffer requirement to enable the strong and simple regime (Q1 2024), definition of capital (Q2 2024), and all remaining elements (Q2 2024).  

Next steps 

Looking ahead to 2024, we’re looking at a pivotal transition year where regulators are now able to enact change to repeal and replace EU law. While there are long-standing work programmes in the regulatory initiatives grid, such as Basel 3.1, the Strong and Simple regime, and Consumer Duty – which will remain ongoing priorities – we’re mostly looking ahead to the new wave of post-Brexit regulation. This won’t be a quick process, and much of the grid is characterised by reliance on parliamentary time for review or to bring various elements into the regulatory perimeter.  

For more insight and guidance on the regulatory initiatives grid, contact
David Morrey.