Being better informed: financial regulatory, accounting and audit bulletin: April 2016

Easter is traditionally a time for new beginnings. As we move into the new tax year, regulators and governments are looking ahead to what the next 12 months will bring. The Chancellor has set out his tax plans in the Budget, and the FCA has revealed its latest business plan, setting out its key priorities for 2016/17.

The FCA signalled its continuing focus on culture in the business plan, making it clear that it expects to see progress in a number of areas over the next year. So firms should not take a break from accountability since the SM&CR went live in March 2016. In the insurance sector, the FCA announced a review of the effectiveness of workplace pensions Independent Governance Committees. Firms would be well advised to review the contribution of their committees in advance of this. The FCA recognised the importance of technology and innovation in encouraging competition – one piece of work in the pipeline is to look at how technology can make AML procedures more efficient. And in the wholesale market, the FCA outlined a number of pieces of work to ensure the effectiveness of the UK’s primary markets.

In March, the FCA published the findings of its long-awaited thematic review into the fair treatment of closed-book life insurance customers. It was particularly concerned about the way some firms have communicated with their customers about exit and paid-up charges. The regulator wants to discuss with the industry a voluntary cap or ban on exit and paid-up charges, so commercial challenges may lie ahead for insurers.

Banks are facing more disclosure requirements under Pillar 3. The Basel Committee published a consultation on various additions and revisions to the Pillar 3 disclosure rules, including on TLAC and counterparty credit risk. Elsewhere in the prudential space, the Basel Committee has been busy. It issued its second consultation on a standardised measurement approach for calculating operational risk capital. This is in response to concerns that previous proposals would have had a disproportionate impact on certain business models. As in the first consultation, the Committee wants to scrap the advanced models approach, but is now proposing banks use ten years of historical operational loss data in their calculations.

Our feature article focuses on the changing capital landscape for banks. We look at what capital buffers being introduced under the CRD will mean for firms, how different components of the capital regime fit together, and whether the era of rising capital requirements is over.

In the coming weeks and months, we expect to see MiFID II finalised delegated acts, further developments on the Government’s pension reforms and the PSR’s final report on the supply of indirect access to payment systems. 

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