The FCA published its business plan for the coming year this morning. The plan focuses around 5 key priorities for the year. It has been significantly reshaped because of coronavirus as it was intended to show the FCA’s strategic focus for the next 3 years. Instead, the regulator will review the plan as the global financial position becomes clearer.
KEY PRIORITIES OVER THE NEXT 1 – 3 YEARS
Transforming how FCA works and regulates
Coronavirus has meant that the FCA has had to change the way it regulates and it wants to be ready for the future. In order to meet the change in demand and pace, it has identified a few key outcomes it wants to focus on:
- the FCA wants to be able to make faster and more effective decisions
- It plans to invest, to grow and develop its capabilities in order to keep pace with the evolving and more complex regulatory context it is working in.
- As well making use of its wide range of regulatory tools, it wants to operate in a more integrated and simplified way through its ‘One FCA’ concept.
- Prioritise end outcomes for consumers, markets and firms
- it plans on being clearer with firms on the end consumer outcomes the FCA is targeting through its work.
- Intelligence and Information
- In order to be able to use information and intelligence better, the FCA is reviewing its processes around retrieval, analytics and acting on such information
- Investment in systems is in processes, in particular through its data strategy to help the FCA use data better to understand markets and consumers better.
- For firms, it plans to streamline data and regulatory returns through Digital Regulatory Reporting and through better regulatory coordination between the FCA, Bank, PSR, CMA, Treasury and other public bodies.
- Influence internationally on issues that affect UK markets and consumers
- the FCA plans on building stronger links with global partners to ensure that it can respond in the most effective way to global challenges.
Enabling effective consumer investment decisions
The FCA is concerned with the amount of consumer losses that can be caused by the pension/retail investment sectors working poorly. This is highlighted by the stat that those consumers who are scammed lose an average of 22 years’ pensions savings.
The FCA is concerned with the significant risk of harm in these markets driven in part by consumer’s personal responsibility for complex decisions through the shift to defined contribution pensions and pension freedoms.
The FCA wants to ensure consumers are supported to make better decisions and will do this through targeting 3 outcomes:
- ensuring investment products are appropriate for consumer needs – through design, offering good value for money and being marketed in a clear, fair and not misleading way.
- supporting consumers to make effective decisions – through access to high-quality advice and support and awareness of scams and fraud. In particular, a consumer harm campaign is being planned for the retail investment sector.
- ensuring higher standards of governance is adhered to – right through firms’ distribution chains.
Ensuring consumer credit markets work well
The coronavirus has had a major impact on this sector. As a result of this and other factors, the FCA will focus on delivering the following outcomes:
- consumers can find products that meet their needs – through delivery of clear and simple information to ensure ranges and features can be easily understood.
- consumers do not become over-indebted by being given credit they cannot afford.
- affordable credit is available to smooth consumption – through increasing access to fair and affordable credit including alternatives to high-cost credit.
- consumers can take control of their debt at an early stage when they fall into financial difficulty – encouraging and helping firms be able to identify consumers at risk at an early stage and to give them suitable forbearance and encouraging debt advice.
Making payments safe and accessible
The FCA acknowledges that the payments sector is developing quickly and the FCA wants to ensure this market continues to be safe and varied.
The FCA has identified 3 outcomes it wants to deliver and to do so, will collaborate with other regulators (including the PSR, Government and the Bank):
- consumers transacting safely with payment firms – there will be a focus on payment firms’ systems and controls to ensure they are robust enough to combat fraud and operational outages.
- payment firms meeting their regulatory responsibilities while competing on quality and value – the FCA will crack down on firms who fail to deliver safeguarding and other regulatory requirements. It also expects open banking to increase competition in this sector to help consumers access high-quality, fair value products and services.
- consumers and SMEs having access to a variety of payments services – the FCA wants to ensure certain consumer groups and consumers are not excluded from access to different payment methods. A key priority here is ensuring consumers continue to have Access to Cash.
Delivering fair value in a digital age
The FCA wants to ensure it has the necessary skills and tools to effectively supervise firms in the age of Big Data. A particular focus will be on how digital technologies is affecting vulnerable customers and the FCA will focus on 3 outcomes:
- consumers can choose from products that meet their needs, at a suitable quality and price – consumers should have confidence that they are getting appropriate quality and services and that they have the information to assess this.
- digital innovation and competition supports greater value for consumers – a focus will continue on ethical use of data including preventing undue bias or discrimination.
- vulnerable consumers are not exploited or targeted with poor value products and services and access to key products and services is fair – through robust policies.
In relation to the 5 key priorities, the FCA will work across sectors in areas that have a broad market impact:
- EU withdrawal and wider international work
- Climate change
- Innovation and technology
- Operational resilience
- Financial crime
- Culture in financial services
The FCA will also continue to work to address harm in the following areas:
- Wholesale financial markets (orderly transition from LIBOR, clean markets, good value, high quality products, orderly markets in a range of conditions, a market that meets users needs)
- Investment management (ensuring investors get high-quality, fair value products and services – looking at effective disclosure, effective governance and SM&CR, how host SCD firms discharge their responsibilities, LIBOR risk)
- Retail banking (looking at ensuring Access to Cash, operational resilience, minimising fraud and financial crime, a wide range of services are available, high quality products and services are offered, cash savings remedies are delivered including SEAR)
- General insurance and protection (looking to ensure products and services are suitable for customer needs and deliver on their promises through clear, fair and not misleading communications, focusing on value measures, renewals and switching, access to GI&P products is maintained especially for vulnerable customers who should be sign posted to alternative specialist products that might better meet their needs, looking at pricing practices, operational resilience.