Being better informed: August 2017

Regulatory activity showed no sign of slowing down in the run up to the summer holidays, with important developments on the SM&CR, the IDD and Pillar 2 liquidity last month.

July was a particularly busy month for developments in the consumer credit sector. Firstly, the FCA issued the findings of its thematic review into staff incentives and remuneration at consumer credit firms. The FCA is proposing a new rule and guidance to help firms identify the risks their remuneration practices might pose to customer outcomes. And at the end of July, the FCA proposed changes to clarify the rules on assessing creditworthiness and affordability in consumer credit. The FCA also signalled that it’s planning further reforms in the high cost credit sector next year.

Another important document published by the FCA in July was its MiFID II policy statement. The FCA provided responses to all five of its consultation papers on MiFID II implementation and outlined final rules on the majority of the provisions. With the MiFID II implementation deadline now less than six months away, firms should be finalising any outstanding compliance tasks and decisions.

In addition, the FCA published its much-anticipated consultation paper on extending the SM&CR to all FCA-regulated firms. The proposals are set to impact a diverse group of financial services businesses, so the FCA has put forward a proportionate, three-tiered approach. In our first feature article this month we analyse what the proposals will mean for firms.

In the prudential space, the PRA published its second consultation on Pillar 2 liquidity, proposing a new framework for cash flow mismatch risk, a new reporting template and case-by-case approaches for other risks. It plans to implement the changes in early 2018, with new granular LCR introduced on 1 January 2019. The consultation applies to all PRA-regulated banks, building societies and investment firms, which should assess the impact of the new framework and reporting requirements.

The PRA also revealed its priorities for the year ahead in its business plan for 2017/18, published as part of its annual report and accounts. Its focus areas include: planning for Brexit, potential amendments to its supervisory approach to insurers, and developing a supervisory approach to operational resilience and FinTech.

Finally, in our second feature article we examine the package of competition remedies put forward by the FCA in its Asset Management Market Study final report at the end of June. We review the impact of the reforms on asset managers, and take a look at how the FCA’s focus is set to develop further through its related market study into investment platforms. 

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Tessa Norman
Senior associate
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