Overview

The global economy faces massive challenges from coronavirus. The effects are expected to be profound and felt by millions of consumers and businesses.

Against a fast-evolving environment, as the UK’s watchdog adapts to the long-term impact of coronavirus, it remains extremely important that their objectives are delivered. The regulator is focusing their resources on those markets where most potential harm is seen.

Other events are also considered by the FCA. Leaving the EU will create a new political, legal and economic environment for firms and regulators. An important task lies with the regulator – to help manage risks connected with the end of the transition period.

The FCA will preserve the UK’s role as home to open global financial markets. The objectives will be achieved by international engagement on issues of mutual interest.

 

Summary of this Business Plan

First and foremost, the FCA have already taken rapid actions to respond to the immediate shocks and urgent interventions required in the coronavirus emergency. Acting swiftly has been the absolute priority for the regulator, which has been proved by the quick and adequate actions.

The FCA is also adjusting to the longer-term economic impacts on society to ensure that:

  • markets function well
  • the most vulnerable are protected
  • the impact of firm failure is minimised
  • scams are tackled
  • consumers and small firms are treated fairly.

 

Secondly, over the medium term, FCA plans are to focus even more on achieving outcomes where enduring harm is seen. The regulator will focus on the following important consumer matters:

  • that consumers can rely on safe and accessible payments to receive their pay or benefits, settle their bills and access cash when they need it
  • that consumers can make effective investment decisions about their savings, and are not exposed to risky or poor value investment products
  • consumers don’t get into unaffordable debt and are treated well if they do, so that credit markets work well especially for the vulnerable
  • consumers are offered fair value products in a digital age.

 

Firms will be expected to make consumers’ interests the foundation of their business models and behave accordingly.

Last but not least, the regulator is preparing to focus on transforming their operations for a digital age.

To achieve this, the regulator will concentrate on how they assess, share, prioritise and action the information and intelligence they receive, re-engineer the processes and invest to ensure that they have the capabilities, systems and technology that are required. The leading principle will be best value for money.

The FCA will also work with the Government and the stakeholders to shape the future regulatory framework. The current framework is too focused on rules and process, and not enough on principles and outcomes. Far too many resources are seen to be devoted to redress and remediation, and not enough to empowering consumers to take good decisions and regulatory action to prevent harm and safeguarding consumers’ financial wellbeing.

 

FCA Core Work

The guiding principle of all work and efforts of the regulator is preventing or reducing harm to consumers and markets.

The FCA take a forward-looking and strategic approach in their supervisory work. This includes looking both at the conduct of individual firms and, more widely, at how retail and wholesale markets are evolving.

The regulator will continue to tackle significant harm to markets and consumers caused by regulated firms aiming to take advantage of the coronavirus.

FCA continue to investigate firms and individuals who seek to carry on regulated activities without authorisation and take action against those that do not meet the minimum standards, the so called Threshold Conditions for firms and the Fit and Proper test for individuals. For the previous financial year which ended on 31 March 2020, the FCA achieved 217 outcomes using their enforcement powers. The fine figure is £224,428,900.

The FCA will explain their activities and plans in more details in their annual Perimeter Report which is due to be released later this year.

 

FCA Measures Against the Impact of Coronavirus (Covid-19)

The world is facing an unprecedented challenge, caused by the greatest public health crisis for the last century. The FCA’s main priorities are to ensure that financial services businesses give people the support they need, that people don’t fall for scams, and that financial services businesses and markets know what they are expected to do. The actions the regulator have taken so far are:

  • keeping markets orderly functioning during a major ‘repricing’ event
  • issuing emergency guidance so that government schemes, which intend to help SME and mortgage holders, can work
  • supporting consumers with the immediate shocks created by the crisis
  • keeping public access to essential banking services
  • protecting the most vulnerable in society

 

This shock is not like previous economic downturns, as it brings uncertainty and the size of the damage cannot be assessed at this point of time.

Planning ahead is very hard. This Business Plan sets out the priority areas of the regulator’s work over the next 1 to 3 years. It may be months from now, before the regulator is in a more stable position and can focus fully on the activities in its business plan. Even then, the shape and scale of the issues that need to be addressed may have changed significantly as a result of the virus. An update to this plan may follow, if the regulator finds it necessary.

The FCA have a dedicated section on coronavirus on their website, with the latest information for consumers and firms.

Should the FCA find a poor practice or behaviour, they will take the required measures. The regulator is working with a range of partners, including other regulators, law enforcement agencies and firms and consumer groups, to raise awareness of the increased risk of scams in the current uncertain context and help consumers protect themselves.

 

The FCA set 5 key priorities over the next 1-3 years

These key priorities will help the FCA become a more efficient and effective regulator, in the longer term and particularly during the challenging times ahead. The regulator needs to consider how they prioritise and deliver outcomes, how data and technology are used, what capabilities they need to be fit for the future and how work with global partners is done.

Transforming how the regulator works and regulates

Key outcomes the regulator wants to achieve are:

  • Make faster and more effective decisions
  • Prioritise end outcomes for consumers, markets and firms
  • Intelligence and Information – the regulator aims at using information more effectively and the intelligence will allow it to identify harm and remove it more quickly. It will also reduce the regulatory burden on firms. This will be achieved by: 1. Streamlining data and regulatory returns through Digital Regulatory Reporting. and 2. Streamlining operational impact on firms through better coordination between regulators. The potential of working with the other peers will continue to be explored; such as: Bank of England, PSR, Competition and Markets Authority, the Treasury and other public bodies. The FCA will publish this Regulatory Initiatives Grid twice a year. It will allow the Government and regulators to work together to identify and assess any peaks in demand on firms.
  • Influence internationally on issues that affect UK markets and consumers

Enabling effective consumer investment decisions

This will be achieved by targeting 3 outcomes:

  • Investment products are appropriate for consumer needs – FCA will ensure products are designed to meet consumer needs, deliver value for money, and are marketed in a fair, clear and not misleading way.
  • Consumers make effective decisions about their investments – The regulator will strive for consumers to make better-informed investment decisions.
  • Firms and individuals operate under high regulatory standards and act in consumers’ interests – the FCA want to ensure firms have higher standards of governance, a stronger grip over networks of individuals in their distribution chains and that the regulatory system can better tackle the significant cost of misconduct

Assessment of the developments in the financial support market, through the Retail Distribution Review and Financial Advice Market Review evaluation, will continue in order to make sure consumer needs are met.

Ensuring consumer credit markets work well

  • Consumers can find products that meet their needs
  • Consumers do not become over-indebted by being given credit they cannot afford
  • Affordable credit is available to smooth consumption
  • Consumers can take control of their debt at an early stage when they fall into financial difficulty

Making payments safe and accessible

  • Consumers transact safely with payment firms – FCA expect firms to handle and store data correctly and minimise the impact of fraud and operational outages
  • Payment firms meet their regulatory responsibilities while competing on quality and value – FCA expect firms to safeguard customer funds and deliver high-quality, fair value products and services to consumers
  • Consumers and SMEs have access to a variety of payments services – Access means that market developments do not exclude consumer groups and consumers can make payments through their preferred method.

Delivering fair value in a digital age

Fair value for consumers is key to healthy competition and underpins consumer trust in financial services. To achieve this, the FCA will target 3 outcomes:

  • Consumers can choose from products that meet their needs, at a suitable quality and price
  • Digital innovation and competition support greater value for consumers
  • Vulnerable consumers are not exploited or targeted with poor value products and services, and access to key products and services is fair

The FCA Data Strategy will build new ways to collect information and monitor consumers’ satisfaction with financial services firms.

 

International Work and Cooperation

  • EU Withdrawal and Wider International Work

The FCA will be working to strengthen their international engagement. They are working alongside international counterparts in response to the global coronavirus outbreak. They will continue to work closely with European and global stakeholders on developing robust global financial standards and effective supervision, and addressing issues of mutual interest, in areas such as conduct, market integrity, and operational resilience.

  • Climate Change

UK financial services are prepared for the end of the transition period. This includes preparing transitional measures, such as the temporary permissions regime for EEA-based firms and funds passporting into the UK.

  • Innovation and Technology

The FCA has stated it will be investing in new technologies and skills to improve the way they collect and use data, with the aim of regulating firms more efficiently. The FCA also plans to deepen its engagement with industry and society on artificial intelligence, specifically machine learning, and focus on how to enable safe, appropriate and ethical use of new technologies. They would like to use technology to reduce the burden of regulatory reporting on firms. FCA will also replace the Gabriel system with a new platform for collecting firms’ data. This will provide an improved user experience and will include a single identity log on with the Connect system. Following the Viability Assessment, FCA together with the Bank, will take forward the work on Digital Regulatory Reporting (DRR).

  • Operational resilience

The FCA have highlighted that they will require firms and Financial Market Infrastructures (FMIs) to set a tolerance for disruption, and to ensure they can continue to deliver their important business services during severe but plausible scenarios.

  • Financial Crime

The FCA will start to implement changes to how they tackle financial crime. These include making greater use of data to identify firms or areas that are potentially vulnerable. The regulator has also implemented a new registration and supervision regime for cryptoasset activities. The ScamSmart campaign focuses on mitigating consumer harm arising from scams.

  • Culture in Financial Services

The UK-watchdog expect all solo-regulated firms to comply with the requirements of the SM&CR as they fall due. The regime aims to see firms across financial services foster healthy cultures where conduct and fair customer outcomes are at the forefront of their business. The FCA will continue to focus on the 4 key culture drivers in firms – purpose, leadership, approach to rewarding and managing people, and governance – and their effectiveness in reducing the potential harm from firms’ business models and strategies.

 

Financial Services Sector Work

The core activity is regulating conduct across the UK’s vast financial services sector.

Wholesale financial markets

Key outcomes the regulator wants to achieve:

  • Orderly transition from LIBOR – It is important that firms transition before the prospective end of LIBOR after the end of 2021 and treat customers fairly
  • Clean markets that make it difficult to commit market abuse and financial crime
  • Wholesale markets that deliver a range of good value, high-quality products and services to market participants
  • Markets remain orderly in a range of market conditions
  • Markets meet users’ needs.

Investment management

  • Key outcomes to be achieved – Investors get high-quality, fair value, products and services

Retail banking

  • Key outcomes to be achieved – The retail banking sector is operationally resilient and supplies important products and services with minimal disruption to consumers and markets. The incidence of fraud and financial crime including fraud is minimised within the payments services and the banking sector. Consumers and SMEs can access services that meet their needs, including cash.

 General insurance & protection (GI&P)

  • Customers take out GI&P products and services that are suitable for their needs and deliver on their promises at the time of a claim. A key outcome the FCA would like to achieve in this sector is to ensure customers are not unfairly excluded from GI&P products and services.