Welcome to our weekly round-up for UK financial services regulation. Gavin Stewart summarises the key announcements and developments. Subscribe to receive our updates in your inbox every week.
The obvious headline from this week’s newsletter is the Financial Services and Markets Bill, a centrepiece of the Queen’s Speech. We still await the details, but it's worth reminding ourselves of the timescale here. The bill will probably attract a degree of controversy, including around the new objectives being proposed for the regulators, and is unlikely to become law until around this time next year. Any substantive change is therefore unlikely to be felt before 2024.
The FCA’s CryptoSprint is another item where it would make sense to apply a dose of realism to the future timescale. The UK still has a somewhat confused attitude to crypto and its regulation, and tangible progress in terms of regulation seems likely to be limited to financial promotions for the time being.
Elsewhere, the Payment Systems Regulator (PSR) Panel’s report on digital payments highlights many of the reasons for the hesitancy some still have about moving away from cash. Some of these, most notably the concerns around fraud and privacy, will be hard to allay, certainly in the short term.
IN THIS WEEK'S UPDATE
Queen's Speech: implications to financial services
Prince Charles delivered the Queen’s Speech on 10 May 2022 to both Houses of Parliament, setting out the government’s legislative agenda for the forthcoming parliamentary year. The government announced a range of bills which will impact the financial services sector, including the introduction of the Financial Services and Markets Bill (FSMB) and the Economic Crime and Corporate Transparency Bill (ECCTB).
The purpose of the FSMB is to create a post-Brexit framework which works for the UK market and responds to the evolving financial services sector. This includes reforming the rules that regulate the UK’s capital markets to promote investment, updating the objectives of the financial services regulators to ensure a greater focus on growth and international competitiveness. It also introduces additional protection for those investing or using financial products in order to make it safer and support the victims of scams.
Meanwhile, one of the key objectives of the ECCTB will be to enable businesses in the financial sector to share information more effectively in order to prevent and detect economic crime, including money laundering and fraud.
The FCA has recently hosted around 100 market participants at a CryptoSprint event to explore how the evolving world of cryptoassets could be regulated in the UK.
Over two days, participants explored some of the challenges facing the industry, including how the FCA can support and balance innovation with high standards that protect consumers and markets.
Separately, the FCA has also issued a reminder to consumers that it cannot comment on individual cryptoassets and non-fungible tokens (NFTs). The FCA has reminded consumers that it has not been given regulatory oversight over direct investments in cryptoassets and NFTs, and there are no consumer protections in place such as the Financial Services Compensation Scheme (FSCS).
Executive Director of Consumers and Competition at the FCA, Sheldon Mills, recently delivered a speech at the British Insurance Brokers' Association (BIBA) Conference. The speech recognises the important role of insurance brokers in helping consumers and businesses find insurance products, and acknowledges the role of innovation and technology such as blockchain or data sharing in promoting competition and positive change.
Recent changes in regulation in this sector – such as the Insurance Distribution Directive (IDD) and general insurance pricing and product governance rules – should put firms in good stead to adapt to the new Consumer Duty. However, the FCA is mindful of its impact on brokers of all sizes when reviewing or implementing new regulations as the industry is made up of firms of various scale and complexity.
The speech ended with highlighting the importance of diversity and inclusion and ESG in delivering good outcomes to consumers.
At the request of the Payment Systems Regulator (PSR), the PSR Panel has produced a report looking into digital payments. The objective of the review was to understand the hesitations to taking up digital payments and to identify possible solutions.
The review observed several factors explaining the continued reliance on cash:
the physical nature of cash making budgeting easier
concerns around fraud, error and privacy
lack of financial or digital understanding
lack of access to digital or financial infrastructure
delays associated with digital solutions versus cash can present cashflow management issues for small businesses/organisations
digital solutions may not be available at a price that small businesses are willing to pay
The panel’s recommendations can be broadly grouped into the following categories:
improving awareness, understanding and trust in digital payments options
The FCA has recently opened its consultation on changes to the FCA Handbook to reflect the expansion of the Dormant Assets Scheme.
The Dormant Assets Scheme (DAS) currently allows banks and building societies to pay dormant monies to an authorised reclaim fund which then puts this money towards funding good causes. The FCA has been working closely with the government and Reclaim Fund Limited (RFL) to expand this scheme and is now proposing amendments to RFL's rules and guidance to enable insurance, pension and securities firms to participate.