A view from The Shard - A compliance round-up from Protiviti (September)

A view from The Shard - A compliance round-up from Protiviti
A view from The Shard - A compliance round-up from Protiviti (September)

Your UK regulatory compliance news roundup (June 2019)

“The summer heat may have waned and the curtain may have begun to finally come down on the PPI complaints era - a welcome end to the Damocles sword hanging over the financial services industry for too long - but the heat of Brexit continues to keep the regulators, Ministers and most industries hot under the collar. The preoccupation with Brexit impacts has ramped up as a result of the unprecedented developments at Westminster. The ECB is urging banks to significantly step up no-deal preparations to minimise the impact of execution risk.”

- Bernadine Reese

Operational resilience remains on the regulators’ radar as they discuss with the government how firms balance resources to prevent disruption and deal with it when it does occur ahead of a consultation expected to be published in Autumn.

Recent delays announced by the FCA for input on accessing and using data in wholesale markets, and its response to guidance consultation on fair treatment of vulnerable consumers may indicate that the regulator is finding it challenging with their finite resources to stay on trac and respond to Brexit. In other news, the transition from LIBOR remains a priority, as does focus on protecting customers which continues with the FCA’s ScamSmart campaign to protect pension savers and its call on claim management companies to improve their advertising standards. Preventive action against potential and actual customer harm remains high on the regulatory agenda. The FCA’s annual letter to level 1 firms on their observations of renumeration and reward practices reinforces the continuing theme that creating healthy cultures and behaviours (including those driven by staff remuneration and incentives) will lead to good conduct outcomes. In addition, Protiviti shares its own views on conduct risk in its recent white paper – Five Reasons for Conduct Risk Failures – With one Shared Cause.

What We Are Reading

Conduct & Governance

FCA agrees plan for a phased implementation of Strong Customer Authentication

The FCA has announced an 18-month plan to implement Strong Customer Authentication (SCA) within the e-commerce industry of card issuers, payments firm and online retailers. SCA is intended to enhance the security of payments and limit fraud during the authentication of customers identity and validation of specific payment instructions by banks or payment services providers.

Source - FCA

5 million pension savers could put their retirement savings at risk to scammers

As part of latest ScamSmart campaign, the FCA and The Pensions Regulator (TPR) are joining forces to warn pension savers about fraudsters targeting people’s retirement savings. Pension cold calls, free pension reviews, claims of guaranteed high returns, exotic investments, time-limited offers and early access to cash before the age of 55 could all tempt savers into risking their retirement income.

Source - FCA

Claims management companies must raise advertising standards, says FCA

The FCA continues to find widespread poor-practices amongst claims management companies (CMCs). To ensure that CMCs provide fair, clear and non misleading information to consumers, the FCA has introduced a number of new rules in relation to financial promotions issued by CMCs . These rules require CMCs to:

  • Identify themselves as a claim management company
  • Prominently state if a claim can be made to a statutory ombudsman without using a CMC and without incurring a fee
  • Include prominent information relating to fees and termination fees which the customer may have to pay if a firm uses the term ‘no win, no fee’ or a term with similar meaning

Source - FCA

Time is running out: the pressure is on to prioritise PPI

The end of August finally saw the end of the PPI complaints. An estimated 64 million PPI policies were sold in the UK, the majority in the 90’s and 00’s. Products that commonly had PPI attached include loans, mortgages, credit cards or store cards. Consumers who did not complain to their providers by 29 August 2019 will not be able to claim money back for PPI.

Source - FCA

FCA letter to level 1 firms on 2019/20 remuneration round

FCA published a letter to the Remuneration Committee Chairs of level 1 firms which sets out the findings and observations from the 2018/19 remuneration round, and how it plans to assess firms throughout 2019/20. Firms' culture and governance are key cross-sector priorities so the regulator will continue to focus on firms' remuneration and recognition practices to ensure that approaches to rewarding and incentivising all staff reinforce healthy cultures and do not drive behaviours that would lead to market or consumer harm.

Source - FCA

FCA to increase focus on SMCR conduct rules

The FCA has indicated that it intends to increase its supervisory focus on the application of the senior managers and certification regime (SMCR) conduct rules. It has published the findings of a review into how successfully the SMCR is embedded into the banking sector.

Source - FCA

Anti-financial Crime

FCA speech on fight against fraud

Mr Randell, the Chair of the FCA, explained at the FCA’s 2019 Annual Public Meeting that fraud is a devastating crime that has reached epidemic proportions. The FCA is committed to making all the changes necessary so it can be as good as it can be in contributing to the fight against scammers. It also continues to work on improving transparency and consumer understanding of the risk, to drive down the harm caused by fraudsters.

Source - FCA


Speech by FCA's Mark Carney on the Growing Challenges for Monetary Policy in the current International Monetary and Financial System

The Governor of the Bank of England, provided a brief on UK's economy, highlighting that intensification of Brexit uncertainties and weaker global activity have weighed heavily on UK activity.

Source - Bank of England

Are UK branches of EU-27 banks ready to become third-country branches?

Post-Brexit, the UK branches of the EU-27 banks will no longer benefit from lighter regulatory requirements compared to the third-country branches as all branches will ultimately be subject to the same rules. Given that, the EU-27 banks operating in the UK as branches should ramp up their preparations and familiarise themselves with the Prudential Regulation Authority's (PRA) approach to the supervision of the third-country branches. PRA's expectations from third -country branches are:

  • Focus primarily on wholesale banking activities
  • Provide clarity over their main areas of business i.e. if they carry out Critical Functions to enable the regulator to determine the materiality of its activities
  • Implement arrangements, processes and mechanisms that are comprehensive and proportionate to the nature, scale and complexity of the risks inherent in its business and activities
  • Have appropriate risk management to support the Critical Functions they undertake

Source - Finextra

ECB advises banks to ramp up no-deal preparations

The European Central Bank (ECB) recently called on banks to step up their preparations for a no-deal Brexit at the end of October 2019. The ECB asserts that banks have transferred significantly fewer activities, critical functions and staff to euro area entities than originally foreseen as part of their plans for Brexit. It expects banks to speed up the implementation of their plans to minimise execution risk.

Source - ECB Banking Supervision

Operational Resilience

Regulators give evidence on IT and systems failures

Representatives of the FCA, PRA and the Bank of England gave evidence to the House of Commons Treasury Select Committee in relation to IT failures in the financial services sector. The regulators discussed the need for firms to balance resources between taking pre-emptive action to prevent disruption and understanding how to react and recover when an incident does occur.

With operational resilience being one of FCA's core priorities for the past three years, a joint PRA/FCA discussion paper on building the UK financial sector's operational resilience is expected in October 2019.

Source - House of Commons Treasury Committee

Digital & Innovation

Use of big data analytics in insurance – IAIS publishes its issues paper

The International Association of Insurance Supervisors (IAIS) published for consultation a draft issues paper on the use of big data analytics (BDA) in insurance. The paper focuses on issues relating to the use of personal and other data by insurers as a result of digitisation. The granularity of data from multiple sources can lead to more personalised and affordable insurance products.

Source - IAIS

EBA publishes clarifications to the fifth set of issues raised by its Working Group on APIs under PSD2

The EBA has published clarifications to a fifth set of issues raised by participants of its Working Group (WG) on APIs under PSD2. The clarifications respond to issues raised on the measurement of response times of the dedicated interface, the machine-readability of the EBA register, reliance on eIDAS certificates and various issues related to the contingency measures, including the identification of third party providers through ‘guest books', the data that can be accessed and documentation.

Source - EBA

Joint EBA and ESMA response to the letter of 19 July 2019 on crypto-assets

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) together published a letter in response to an earlier letter from Valdis Dombrovskis (Vice-President European Commission, Financial Stability, Financial Services and Capital Markets Union) concerning crypto-assets, including stablecoins. The letter outlines following:

  • Engagement with international regulatory authorities on matters such as the prudential treatment of banks’ exposures to crypto-assets and the regulatory treatment of crypto-asset exchanges and trading platforms;
  • The European Supervisory Authorities will launch shortly a new stocktaking exercise of Member State national regimes applicable to crypto-assets;
  • The topic of stablecoins will be discussed at the upcoming European Forum for Innovation Facilitators event in September.

Source - ESMA

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Bernadine Reese
Bernadine Reese
Managing Director
Stuart Campbell
Stuart Campbell