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This week we shine a spotlight on the intersection of ‘Big Tech’ and financial services; A topic of increasing focus for regulators worldwide. Recognising the growing dominance and influence of Big Tech firms, the Financial Conduct Authority (FCA) has launched an important call for input around the potential competition impacts and potential benefits from the use of customer data.
Elsewhere, in a recent speech the FCA has again emphasised the importance of diversity and inclusion in firms’ culture (with a predictable reference to the Consumer Duty), and, presumably with less fanfare, released its consultation paper on regulatory fees and levies for 2024/25.
Potential competition impacts between Big Tech and firms in financial services
The FCA has launched a call for input to gather evidence on whether data asymmetry between Big Tech and financial services firms could lead to Big Tech firms gaining market power in financial services.
The FCA is also looking for evidence on other significant factors, which may have evolved since their Feedback Statement (FS23/24) was published.
The call for input is of interest to Big Tech firms, established regulated financial services firms, smaller challenger firms (including fintech firms), trade bodies of regulated firms, groups representing consumers’ interests, and national and international competition authorities and regulators with an interest in digital markets.
The FCA intends to report back on the CFI in Q2 of 2024, where they'll set out their analysis of evidence received and any actions they may take.
Your organisation's power through culture and conduct
Emily Shepperd, FCA Chief Operations Officer and Executive Director of Authorisations, has delivered a wide-ranging speech touching on the importance of diversity & inclusion (D&I) initiatives and their relationship with customer outcomes, the importance of transparency and the use of metrics, and how the FCA attempts to apply the principles of regulation to itself.
The speech reiterates the FCA’s view that “healthy cultures” lead to better outcomes for both firms and customers, and that D&I is an important step towards achieving a healthy culture. Benefits cited include the diversity of thought, reduced tendency for groupthink, and capacity for empathy with a greater range of customer circumstances. Of particular interest is a suggestion that second and third line of defence functions should play a role in holding leadership to account for creating an inclusive culture – implying that compliance and internal audit teams may need to include D&I within their planning, an area that could be outside their traditional comfort zones.
The role of gatekeepers in financial services
Nathanaël Benjamin, Executive Director of Supervisory Risk Specialists at the Bank of England, has given a recent speech titled 'The modern gatekeeper', in which he discussed the role of gatekeepers in the financial industry and the need for authorisations team to be approachable, proportionate, and predictable.
In his speech he confirms that the Prudential Regulation Authority (PRA):
- will not consider competitiveness as part of the authorisations process because it conflicts with its primary objectives
- will improve its operational processes, including the forms for authorisations and senior managers.
Regulatory fees and levies: policy proposals for 2024/25
The FCA has published its consultation paper on how it raises fees from 2024/25. The paper applies to all FCA fee-payers, levy-payers of the Financial Ombudsman Service and of the Financial Compensation Scheme, and to any businesses considering applying for FCA authorisation or registration.
The FCA are proposing changes to application fees by restricting the uplift to the overall increase in Ongoing Regulatory Activities budget (ORA) between 2023/24 and 2024/25 so that it relates to the increase in the overall operating cost of the FCA.
Minimum and flat rates are set to increase in line with the increase in ORA. Consumer credit firms should expect the removal of Bank of England base rate from the calculation of the proxy and a factor 5% replacing it as a temporary measure. The FCA have also included an array of changes in approach to the structure and tariff base of fee-block A.10 for firms dealing as principal.
Prudential assessment of acquisitions and increases in control
The PRA has published a consultation paper (CP25/23) which proposes updates to its supervisory statement on the prudential assessment of acquisitions and increases in control.
The proposed updates aim to clarify and strengthen the PRA's expectations around the assessment of the impact of acquisitions and increases in control on the safety and soundness of regulated firms.
This paper also includes guidance on assessing the impact of proposed acquisitions and changes in control on the firm's financial resources, risk management systems, and governance arrangements.
The consultation period ends on 23 February 2024.
Now in its seventh year, the UK regulatory handbook 2023 / 24 is your essential guide to the regulatory landscape for financial services.