FCA speaks on regulatory priorities for retail banking

At the Westminster Business Forum on retail banking and payments, Karina McTeague, Director of Retail Banking Supervision, delivered a speech on the regulatory priorities in the retail banking sector. She explained FCA’s priorities as articulated in its business plan, and said all have application to retail banking. FCA is looking closely at how retail banks are implementing ring-fencing the SMR and the CMA remedies. However, she concentrated on PSD2 and the FCA review of retail banking business models.

The speech focused largely on PSD2, noting both the opportunities inherent in Open Banking and the likelihood of regulatory delay: although coming into effect in January 2018, we are unlikely to see RTS on authentication and security before mid-2019. In the absence of RTS, FCA expects firms to have systems in place to protect customer data and prevent fraud. FCA will review fraud reports to form an overview of the sector.

Changes to retail banking legislation have demanded more capacity and capability from FCA, which announced an extension to its programme of proactive engagement with existing payment services institutions, as well as preparing to supervise newly regulated account initiation service providers (AISPs) and payment initiation service providers (PISPs). Supervision will entail examining a firm’s culture to ensure it treats customers fairly, and assessing systems and controls both in relation to managing financial risks, and risks of financial crime.

Retail banking is promised increased competition and innovation through the introduction of PSD2 and Open Banking. It is FCA’s priority to ensure that these benefits are passed onto the consumer. It is bolstering its payments capacity and capability to help firms and pro-actively supervise them.