Welcome to our weekly round-up for UK financial services regulation. Gavin Stewart summarises the key announcements and developments. Be sure to subscribe to receive our updates in your inbox every week.
This week's items offer a look into some of what is likely to constitute the main regulatory themes after COVID-19 has subsided.
The benchmark consultation shows continued progress in implementing one of the last remaining elements of regulatory reform that was instituted after the financial crisis. Meanwhile, the extended mortgages and consumer credit regulations prefigure what will be a much deeper approach to regulation regarding the treatment of vulnerable consumers.
Elsewhere, the Financial Conduct Authority's (FCA) fee base is likely to change substantially, both during and after coronavirus, as the shape of sectors change, some firms wind down and M&A activity increases. And, for the same reasons, data protection and privacy issues, which were a growing theme before, will soon become a major priority for regulators.
This week's update covers:
Regulatory fees and levies: proposals for 2021/22
The FCA has published a consultation paper (CP 20/22) on its proposed policy changes to the way it raises its fees for 2021/2022.
The FCA raises its funds from the industry it regulates and does not receive any government funding. The policy changes will affect all authorised firms and those currently in the process of applying for authorisation.
Chapter 2 of the consultation will be of primary interest to most firms. In essence, the FCA proposes to revalorise and simplify its fees, while also introducing some new transaction fees to reflect the environment we are currently in.
Those applying for authorisation will see a rise, but otherwise the FCA anticipates the impact will be relatively marginal on existing fee-payers.
FCA reminds firms of their data protection obligations
The FCA has issued a statement reminding firms of their data protection responsibilities, particularly when firms merge with others or exit the market. It has signposted some of the key information available from the Information Commissioner’s Office (ICO) to support firms in meeting these obligations.
In addition, to highlight the role of the ICO, the FCA also states that it expects firms transferring or receiving customer data to be able to demonstrate how they have considered fair treatment of customers and compliance with data protection laws. The FCA states that it will take enforcement action where data protection failings breach Handbook requirements, particularly in relation to Principles 3 (risk management), 6 (treating customers fairly) and 7 (customer communication).
The FCA has set out its thinking on how it would take a designated critical benchmark (such as LIBOR) and make changes or manage an orderly wind-down of it.
Under the proposed amendments to the benchmarks regulation in the Financial Services Bill, the FCA will be granted new powers. The regulator will, however, be required to publish statements of policy when exercising these powers.
The FCA is seeking industry views (before 18 January 2021) on the following two documents:
1 Designating an unrepresentative benchmark using new powers under proposed Article 23A
2 Requiring changes to a critical benchmark, including its methodology, using new powers under proposed Article 23D
The FCA has published its finalised guidance to firms on how they can best support mortgage borrowers who face payment difficulties because of coronavirus. The guidance came into force on 20 November 2020, and provides an update to the additional guidance for firms that was issued on 14 September 2020.
There are two sets of finalised guidance:
1 The payment deferral guidance
To continue to provide support to those mortgage borrowers impacted by coronavirus until 31 July 2021, with customers needing to apply for payment deferrals by 31 March 2021.
2 The tailored support guidance
To provide support for mortgage borrowers who have come to the end of payment deferrals and are continuing to face financial difficulties because of coronavirus.
In addition, the FCA has confirmed that no-one should have their home repossessed, without their agreement, until at least after 31 January 2021.
Finalised guidance on consumer credit and COVID-19
On 19 November 2020, the FCA published finalised guidance that applies in the exceptional circumstances arising out of the coronavirus situation and its impact on the finances of consumer credit customers.
The guidance came into effect on 25 November 2020, although the FCA had encouraged firms to provide enhanced support sooner where possible.
Given ongoing uncertainties arising from the impact of coronavirus, the FCA will continue to keep its position under review and will update or amend the guidance, or provide new guidance, if it is required.