Observations from the FCA’s webinar: One year on
The Financial Conduct Authority (FCA) live streamed an event on Wednesday 31 July, focusing on the impact of the Consumer Duty in its first year.
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The Capital Attribution Tax Adjustment
Non-UK resident companies trading in the UK through a permanent establishment (PE) must determine their 'attributable profits’ by applying the ‘separate enterprise principle’. This article shows how the capital attribution tax adjustment (CATA) for bank branches can be benchmarked to market rates and to capital ratios of comparable banks to produce a more accurate result.
Model risk management - Principle one
In PS6/23 and SS1/23 – ‘Model risk management principles for banks’, the PRA outlines five Principles designed to support effective model risk management (MRM), the first of which relates to ‘model identification and model risk classification’.
15 July 2024
FS regulatory affairs newsletter – Q2 2024
In this instalment of the FS regulatory affairs newsletter, we look back at our experts’ analysis of the regulatory developments announced in the second quarter of 2024. Our comprehensive overview covers topics relevant to firms across all sectors of Financial Services, as well as focused pieces for Banking and Insurance organisations.
European Banking Authority on PVA
The European Banking Authority (EBA) has published amendments outlining requirements for calculating Prudent Valuation Adjustments (PVA) on fair-valued financial instruments held by institutions.
12 July 2024
Regulatory update for insurance: Q2 2024
In this article, we highlight regulatory developments in Q2 2024 for insurance covering Appointed Representative (AR) oversight, Guaranteed Asset Protection (GAP) sales, motor total loss claims, Consumer Duty updates, a post-implementation review of travel insurance signposting rules and Solvency II Matching Adjustment (MA) reforms.
Outcomes monitoring multi-firm review
The FCA recently published a multi-firm review of outcomes monitoring under the Consumer Duty. While the review was carried out across 20 firms in the insurance sector, the findings are relevant across all sectors.
26 June 2024
How are firms meeting the March 2025 deadline?
The FCA/PRA deadline for firms to ensure alignment of their operational resilience frameworks with regulatory requirements is fast approaching, in particular demonstrating Important Business Services (IBS) can operate within the defined Impact Tolerances.
Financial reporting of European banks 2024
Is the perceived reduction in risk among European banks an early sign of sector-wide optimism? In 2023, we faced a global economic slowdown, persistent geopolitical tensions, and rapid technological advancements. Analysing the year-end results of Europe’s 26 largest banks, what insights can we gain about expected credit losses and the strategies these institutions implement to manage ongoing uncertainties...
Solvent exit planning
In March, the Prudential Regulation Authority (PRA) published SS2/24 on solvent exit planning for non-systemic banks and building societies. This statement outlines the PRA’s expectations for non-systemic banks and building societies in the UK to prepare, as part of their business-as-usual (BAU) activities, for an orderly ‘solvent exit’. This requirement will come into force from 1 October 2025.
FS regulatory affairs newsletter - Q1 2024
In this instalment of the FS regulatory affairs newsletter, our experts have summarised the significant updates firms should be aware of in the first quarter of 2024.
BoE - insights for climate-related financial risks
On 17 April 2024, the Bank of England (BoE) published an article with useful insights for financial institutions on using scenario analysis to measure climate-related financial risks.
UK vs US - Comparing Basel 3.1 implementations
The US unveiled its take on the BCBS Basel reforms on July 27th, 2023, calling it the “Basel III Endgame” (referred to as Basel 3.1 in the UK). This article outlines the key disparities between the US and UK approaches to implementing these reforms.
Data implications of Basel 3.1
The Prudential Regulation Authority (PRA) continues to emphasise the importance of the reliability and accuracy of regulatory data for banks and building societies. Data risk is named a main priority within the 2024 Dear CEO Letter and through the Transforming Data Collection initiative between the Bank of England and the Financial Conduct Authority.
Effective regulatory reporting assurance
Banks are expected to have robust governance and controls processes for the production of their regulatory returns. In particular, the PRA outlined its expectation that banks should perform independent testing and validation of their regulatory returns to ensure they are reliable and accurate. With the PRA’s increasing focus on regulatory reporting demonstrated through SREP reviews and S166s reviews,...
Reporting assurance for small & medium-sized banks
The Prudential Regulatory Authority (PRA) has outlined its expectations for the preparation of regulatory returns in The Dear CEO Letter (DCEO), which focuses on the “Thematic findings on the reliability of regulatory reporting”. Dated the 10th of September 2021, the letter highlights the PRA’s expectations for banks to submit reliable and accurate regulatory returns, and for the regulatory reporting...
Basel 3.1 video series
Basel 3.1 is the final set of amendments to the capital regime for banks after the Global Financial Crisis. The Prudential Regulation Authority (PRA) proposed that the implementation date for the changes would be 1 July 2025. In this series, we take a closer look at what firms need to consider before these reforms will be live in the UK.
Expectations ahead of final Basel 3.1 rules
Pending the release of the PRA’s Basel 3.1 final rules, our banking risk experts discuss the proposed changes to credit risk and output floor rules, as well as the near-final rules relating to market risk and operational risk.
The FCA’s Business Plan 2024/25
The Financial Conduct Authority (FCA) published its 2024/25 Business Plan on 19 March, setting out how it will deliver the final year of its three-year strategy. To fulfil the FCA’s objectives [1], the strategy seeks to reduce and prevent serious harm, set and test higher standards and promote competition and positive change.
Implementing the IFPR: key lessons for firms
On November 27th, the Financial Conduct Authority (FCA) published a second and final report with further observations on how firms are implementing requirements on the Internal Capital Adequacy and Risk Assessment (ICARA) process and reporting under the Investment Firms Prudential Regime (IFPR).
Operational opportunities and challenges
With the introduction of the Strong & Simple (S&S) regime, UK banks will be predominantly categorised as under either the S&S regime or the Capital Requirement Regulation (CRR). For firms considering whether to apply to the S&S regime a thorough evaluation of the respective regulatory implications of either approach is required.
Suspension of GAP sales & fair value
The agreement to pause sales of Guaranteed Asset Protection (GAP) insurance for 80% of the market was a big headline in February. It may have come as a shock to some but the FCA’s concerns with GAP insurance are nothing new, dating back to its 2014 Market Study. The FCA pointed to its 2022 value measures data and had given GAP firms a stark warning in September 2023 over fair value.
Anti-greenwashing rule & the insurance industry
The FCA introduced the anti-greenwashing rule (AGR), which comes into effect on 31 May 2024, as part of its supervisory kit to create a common understanding of the sustainability characteristics of products and services.
FS regulatory affairs newsletter – Q4 2023
In this instalment of the FS regulatory affairs newsletter, our experts present their analysis of regulatory developments of the fourth quarter of 2023.
FCA intervenes in the Motor Finance Sector
On 11 January, following the first decisions from the Financial Ombudsman Service (“FOS”) upholding complaints relating to “discretionary commission arrangements”, the FCA published its long-expected intervention relating to historic commission issues in the motor finance sector.
FS regulatory affairs newsletter – Q3 2023
Welcome to our recent instalment of the FS regulatory affairs newsletter. In this edition, we delve into the regulatory developments of the second quarter of 2023.
How can you support customers when handling claims
In July 2023, the Financial Conduct Authority (FCA) made changes to its handbook [1] to embed guidance on good outcomes for customers experiencing financial difficulties. This sits in ICOBS 2.7 and, whilst claims handling is not specifically mentioned, it is relevant to how you support your customers at the point of claim.
FS regulatory affairs newsletter – Q2 2023
In continuation of our previous FS regulatory affairs newsletter, this edition highlights the key regulatory updates from the second quarter of 2023.
IFPR - enhancing firms’ risk management practices
On February 27th, the Financial Conduct Authority (FCA) published a report highlighting key observations on the implementation of the Investment Firms Prudential Regime (IFPR) and its relation to the Internal Capital Adequacy and Risk Assessment (ICARA) process. This article outlines the four major themes in the FCA’s report and provides insights into how firms can improve their next ICARA process...
BoE's regulatory capital frameworks
The Bank of England (the Bank) shared its latest thinking on climate-related risks and regulatory capital frameworks in a report released on March 13, 2023. The report elaborates on six key findings and identifies areas for future research and discussion. However, the Bank does not introduce any policy changes in response to the report. Instead, it suggests further analysis is needed before introducing...
FS Regulatory affairs newsletter - Q1 2023
Following on from our previous edition of the FS regulatory affairs newsletter, this edition covers regulatory developments in the first quarter of 2023.
Introducing a UK Insurance Resolution Regime
In January 2023, HM Treasury published its consultation paper setting out proposals for the introduction of an Insurance Resolution Regime (IRR) for the UK insurance sector.
FCA’s Business Plan 2023/24
On 5 April 2023, the Financial Conduct Authority (FCA) published the 2023/24 Business Plan which sets out how the regulator will deliver the second year of its three-year strategy. We highlight the key areas of focus from the Business Plan below.
The CFRF’s Scenario Analysis Guide for Banks
The Climate Financial Risk Forum (CFRF) has shared a non-regulatory practitioner’s guide for banks and building societies on how to use scenario analysis to assess the financial impact of climate change and inform their strategy and business decisions.
FS regulatory affairs newsletter - Q4 2022
Following on from our Q3 2022 edition of the FS regulatory affairs newsletter, this edition covers regulatory developments in the fourth quarter of 2022.
Recovery and resolution
The 2008 Global Financial Crisis revealed that major banks were in fact ‘too big to fail’. They had grown so large and complex that they needed state support given the unfathomable economic consequences of their collapse. As a result, financial regulators have introduced robust prudential measures to try to prevent such a crisis from happening again. A critical element of these post-crisis reforms...
Bank of England Climate and Capital conference
The Bank of England formally engaged with the international financial community to discuss the role of regulatory capital in the management of climate risks.
FS regulatory affairs newsletter - Q3 2022
Following on from our Q2 edition of the FS regulatory affairs newsletter, this edition covers regulatory developments in the third quarter of 2022.
FCA Dear CEO letter: cost of living & insurance
On 29 September 2022, the FCA acknowledged the continued challenges faced by consumers and businesses alike from the rising cost of living. The latest Dear CEO letter acknowledged the recent Government measures but noted the continuing financial challenges faced, including higher costs (such as energy costs) and staffing issues.
Changes to the NGFS’s benchmark climate scenarios
The Network for Greening the Financial System (NGFS) published an amended, third set of climate scenarios on 6 September 2022. The key updates include incorporation of countries’ commitments to reach net-zero emissions, increased sectoral granularity and improved representation of physical risk, including acute risks.
FS regulatory affairs newsletter - Q2 2022
Following on from our Q1 2022 edition of the FS regulatory affairs newsletter, this edition covers regulatory developments in the second quarter of 2022.
FCA reminds lenders to support consumers
The FCA reminds lenders of expectations to support consumers in light of the rising cost of living
PRA’s 2022 priorities for banks operating in UK
The Prudential Regulation Authority (PRA) has distributed a Dear CEO letter to all international banks and deposit takers active in the UK. This letter is to ensure there is a continuous focus guided by the PRA’s supervision and highlight the PRA’s planned work for next year; and should be read in conjunction with the feedback from individual PSM letters.
FCA’s Business Plan 2022/23
On Friday 8 April 2022, the FCA released its 2022/23 Business Plan in line with its usual timings. The scene is set with Covid-19 continuing to provide uncertainty, rising costs (due to inflation, interest rates and geopolitical uncertainty) and the risk of serious financial problems for many people.
FS regulatory affairs newsletter - Q1 2022
Following on from our inaugural publication of the FS regulatory affairs newsletter in December last year, this second edition covers regulatory developments in the last three months.
PRA’s strong and simple regime
For many years, the PRA has been applying a proportional approach to both regulating and supervising smaller banks, but there is a marked difference as supervision has been more pronounced.
Priorities of the Payment Services Regulator
On 13 January 2022, the Payment Services Regulator (PSR) published its first formal strategy. The implementation of this five-year strategy will materially impact Payment Service Providers (PSPs) through increased focus on accessibility, protection, and competition.
Integrity of regulatory reporting
The end of 2021 saw the PRA deliver on its warning in the September 2021 ‘Dear CEO’ letter, that they would take a tough stance on banks and building societies that fail to meet expectations around reliable regulatory reporting.
Remuneration
All firms regulated by the PRA are required to identify Material Risk Takers, regardless of their size and must have adequate procedures and policies, including the risk assessments, allowing a proportionate identification of MRTs.
Updated reporting requirements for PRA firms
On 1 January 2022, the PRA’s Policy Statement PS22/21 'Implementation of Basel Standards' took effect.
FCA Consultation Paper CP21/36
On 7 December the FCA released CP21/36 - the highly anticipated second consultation which provides more detail on the FCA’s proposals for new standards of consumer protection and care in retail financial markets in the form of a ‘Consumer Duty’.
FCA’s Appointed Representative Regime
Following the Consultation Paper released on 3 December 2021 (CP 21/34), the FCA confirmed new rules on the Appointed Representatives regime.
Regulated firms: a matter of life and death
As the PRA transitions from a rule-taker to a rule-maker, small and medium-sized banks operating in the UK can expect to benefit from a more streamlined regulatory regime that could be easier to interpret, implement and maintain. At the same time, they can also expect the PRA to be progressively more involved in scrutinising their plans for an orderly wind-down. In this article, we explore how banks...
FCA confirms approach for pre-paid funeral plans
Pre-paid funeral plans can be large financial purchases that affect vulnerable customers and can be difficult for customers to understand.
FCA’s Business Plan 2021/22
On 16 July the FCA released its business plan for 2021/22 and what has been published is a more ‘innovative, assertive and adaptive’ approach than we’ve seen previously.
FCA proposes enhanced climate-related disclosures
The UK is getting ready to co-host the private finance agenda of the COP26 and key goals include improving quantity and quality of climate-related financial disclosures. Following that approach, the FCA is working on establishing pathways to mandatory disclosure and promoting alignment of disclosure around the Taskforce on Climate-related Financial Disclosures (TCFD) framework.
IFPR – The second consultation paper from the FCA
The FCAs second consultation paper(CP21/7) on proposed rules to introduce the Investment Firm Prudential Regime (IFPR) was released on 19 April 2021.
FCA calls on retail banks to address weaknesses
The FCA has called UK retail banks to action over continued weaknesses observed in anti-money laundering frameworks. Is it time to modernise your approach?
Consumer Duty
The FCA’s Consumer Duty sets a higher standard of care that firms should provide to consumers in retail financial markets. The rules came into force on 31 July 2023 for new and existing products and services. The next key milestone is 31 July 2024 for closed products. The Duty is expected to have far-reaching implications across financial services, with the FCA set to supervise against it. For some...
IFPR – The first consultation paper
In December 2020, the FCA detailed some of their proposals for the Investment Firm Prudential Regime (IFPR), which will come into effect in January 2022.
Risk and Regulatory Data - Impact of Covid-19
With the current Covid-19 pandemic and its widespread effects, banks must rely more than ever on data driven insights to monitor their changing risk profile, support quick decision making and respond to impacts on their customers and operating models.
FCA regulation of pre-paid funeral plans
After several high-profile publications and investigations[1], the Government decided that funeral plans should be regulated by the Financial Conduct Authority (FCA) by the summer of 2022.
Disclosures about IFRS 9 ECL accounting
On 16 February 2021, the PRA published a letter it had sent to CFOs requesting an update on their progress towards implementing the recommendations of the Taskforce on Disclosures about Expected Credit Losses, formalised in the DECL Report.
PRA’s introduction of simplified obligations
Since 7 December 2020, firms either have been, or will be notified by their PRA supervisor that they meet the eligibility criteria for simplified obligations for recovery planning (Simplified Obligations). These obligations are set out in the updated supervisory statement SS9/17 – Recovery Planning.
PRA’s amended filing deadline
On 5 February 2021, the PRA provided guidance and confirmed flexibility on submitting this year's annual reports, accounts and other types of regulatory reporting.
2021 Stress testing: scenarios and variables
On 20 January 2021, the Bank of England (BoE) published the details of their 2021 solvency stress test aimed to assess the major UK banks and building societies against a UK and global scenario that reflects a severe path for the current macroeconomic outlook.
PRA’s approach to supervision of new banks
Since 2013, the PRA has authorised 22 new UK banks. They continuously review the authorisation process to ensure it remains proportionate and fair, and to reduce barriers to entry and expansion. A revised approach to supervising new and growing non-systemic UK banks is expected to take effect in the first half of 2021, which is the outcome of consultation CP9/20.
2021 Stress testing the UK banking system
In March 2020, for the first time since its inception in 2014, the Bank of England (BoE) cancelled its annual stress tests for the UK’s largest lenders. Instead, they undertook desktop analysis of the resilience of the UK banking sector. In late 2020, the Financial Policy Committee (FPC) judged that most banks, have capital buffers that allow them to operate and remain resilient to, a wide range of...
UK supervision of international banks post Brexit
Around one fifth of global banking activity is undertaken in the UK. Almost half of the banking assets in the UK are held by international banks and the PRA currently supervises approximately 250 international banks, both branches and subsidiaries, which are part of around 180 international groups.
Back to the future?
For financial services firms, a 2020 priority was preparing for a no-deal scenario while obtaining the appropriate licences to continue to service clients in the EU. This meant keeping up with the complexities of a regulatory regime in transition - with some EU rules continuing to apply during the transition period and uncertainty on whether the UK would continue to align with EU requirements post...
The FCA is replacing Gabriel with RegData
In October 2020, the Financial Conduct Authority (FCA) started replacing Gabriel regulatory reporting system with RegData, with the first group of firms transitioning from mid-October.
Key upcoming prudential reforms
After the publication of the FCA Regulatory Initiative Grid of September 2020, the industry raised concerns about the general volume of regulatory reforms scheduled for 2021. What are these reforms? What should firms be compliant with between now and the end of 2021? Which regulatory points should firms start planning for in 2021? We are going to tackle these three key questions over a series of insight...
Prudential regime banks building societies UK
There is currently a proportionality problem for small firms as they, just like larger ones, incur significant costs for understanding, interpreting and operationalising prudential requirements.
New prudential regime for UK investment firms
Over summer 2020, the UK Government and Regulators shared their views on the European Union’s new Investment Firm Prudential Regime for MiFID investment firms. More importantly, it gave indications of what could happen in the UK.
FCA Banking Business Plan 2019/2020
The cross-sector priorities for the FCA have been subject to little change in the past few years: read our review of the 2019/2020 Business Plan to see if this is set to change
FCA consultation CP19/17
The FCA began its consultation on proposed changes to the way in which firms provide advice to consumers and the sales process.
FCA spotlight on non-financial misconduct
The most recent CEO letter from the Financial Conduct Authority (FCA)in relation to non-financial misconduct and culture failings highlights some worrying behaviours within the insurance industry.
