L&D SPOTLIGHT ON THE FCA
by John T.Otis, Senior Financial Services SME and L&D Lead, GP Strategies
An L&D perspective on the FCA's Business Plan
The Financial Conduct Authority (FCA) commenced operations in 2013. It was formed as one of the two new UK Regulatory bodies that replaced the former Financial Services Authority – the Prudential Regulatory Authority (PRA) is the other Regulatory body, though it should be noted that the FCA also carries out prudential regulation of all firms not regulated by the PRA.
The FCA is financed by Financial Services industry member fees, and operates independently from the UK government. It's role is one of Governance and Compliance – by regulating the UK’s Financial Services industry via maintaining the integrity of the UK’s financial markets. Specifically, the FCA’s primary role includes protecting consumers (regulation of Conduct by both Retail and Wholesale Financial Services firms), keeping the industry stable, and promoting healthy competition between Financial Service providers.
Although the FCA operates independently from the UK government, the government has often emphasised that the FCA must ensure that the cost of regulation is justified by its benefits. Case in point was the early March 2017 Spring Budget speech wherein the government included a recommendation letter for the FCA.
Therein, the Chancellor of the Exchequer, Philip Hammond, said that the FCA should make sure that regulation is consistent and transparent to give investors’ confidence that the FCA is acting proportionately.
Such a statement emphasises the importance of the FCA’s regulatory role while acting as a check over the largess of its regulations.
In as much as the FCA plays a critical role in maintaining the integrity of the Financial Services industry, it demands a rigorous agenda of Governance, Culture and Accountability and publishes a Business Plan which outlines its key priorities.
2017/2018 Business Plan
According to the FCA, “the priorities in the 2017/2018 Business Plan reflect the speed and variety of changes affecting both wider society and financial services. Firms are being challenged by rapidly evolving user needs, as well as heightened uncertainty in the economic and political outlook. The FCA’s Business Plan shows how they will use their resources to tackle these challenges.”
The FCA explains that the six priorities cut across different financial sectors, as well as our priorities for the seven specific sectors they regulate, while also including the FCA’s Risk Outlook – which analyses the wider context in which the FCA works and the risks they see in the market.
The FCA set out the following 6 cross-sector priorities:
1. Firms’ culture and governance:
- Consult on the accountability regime for all FSMA firms
- Continue to review our regulatory framework that governs remuneration
2. Financial crime and anti-money laundering (AML):
- Prepare to take on responsibility for reviewing the quality of professional bodies’ AML supervision
- Investigate how new technology AML processes
- Roll out a further ScamSmart campaign warning of investment fraud
3. Promoting competition and innovation:
- Publish resources to help firms regulate developing ‘robo-advice’ services
- Engage with regional and Scottish FinTech hubs
- Investigate how near and real-time compliance monitoring can reduce the regulatory burden
4. Technological change and resilience:
- Establish cyber co-ordination experiences and foster innovation
- Undertake technology and cyber considered ’high impact’
- Analyse resilience risks in major initiatives, including ring fencing and the Payment Services Directive II
5. Treatment of existing customers:
- Analyse the effect of wake-up packs on consumers’ decisions at the point of retirement
- Look at how firms treat borrowers whose interest-only mortgages are approaching maturity
6. Consumer vulnerability and access:
- Publish our ‘Consumer Approach’ to addressing UK consumers’ needs
- Continue our work in the consumer credit sector, including our continued focus on high-cost credit and overdraft
The 2017/2018 Business Plan also includes a list of 7 Sector priorities as follows:
1. Wholesale financial markets:
- Ensure the new MiFID II regime is implemented effectively
- Continue to implement remedies to improve competition in investment and corporate banking
- Introduce changes to improve the effectiveness of primary markets
2. Investment management:
- Consult on proposed remedies in the asset management market
- Review our policy options in relation to fund liquidity
3. Pensions and retirement income:
- Propose a package of remedies to improve competition in the retirement income market
- Undertake initial work looking at the non-workplace pensions market
- Review non-advised drawdown sales
4. Retail banking:
- Work with the PRA, Bank of England, the Treasury and the larger banks to support the implementation of ring-fencing
- Launch a strategic review of retail banking business models
- Launch a communication campaign to raise awareness and understanding of the PPI complaints deadline
5. Retail lending:
- Set out our analysis and preliminary conclusions on the mortgage market
- Continue to monitor the debt management sector to ensure that it is fit for purpose
- Undertake an exploratory piece of work on the motor finance industry
6. General insurance and protection:
- Conduct a review of pricing practices in general insurance
- Assess how effectively competition is working in the wholesale insurance market
7. Retail investments:
- Assess the market for investment platforms and what we can do to improve competition
- Assess the developing market for automated advice models
- Undertake further work to address the risks in the Contracts for Difference market
It should be noted that the above priorities do not represent the full breadth of the FCA’s work, but, they are used to drive the FCA’s decisions about thematic projects and market studies, while also informing on the areas the FCA will pay particular attention to when conducting its core activities.
From the Financial Services industry members’ perspective, this means remaining focused and vigilant in addressing the FCA’s priorities.
Specifically, the industry needs to understand the FCA’s priorities, assess any impact(s) and identify any internal gaps where guidance and/or clarification is needed.
Implementing an effective L&D strategy
Where gaps are identified and or/clarification is needed, a structured Learning & Development and Training regime is available to assist/support any affected areas and employees.
As a recognised leader in Learning & Development and Training, GP Strategies can help your firm evaluate the impact of the FCA’s most recent Business Plan. We can assist by identifying any gaps, advising on the most effective learning strategy/solution and develop an effective training regime therein – a successful outcome will leave your firm in a stronger and more sustainable operating position vis-à-vis the FCA’s directives.
We welcome an opportunity to explore the above with you, so feel free to contact us.