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Financial services insights
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Establishing a technology talent strategy
As financial services organisations increasingly focus on digital transformation, having the right expertise and skillsets is critical. However, it’s not simply a question of human capital. It requires developing a talent strategy that recognises the profound impact technology will have across the organisation.
Emerging technology and sustainability reporting
The financial services sector is increasingly looking to technology to help tackle the rising levels of regulation they face.
Ethical risks of AI in financial services
The role of artificial intelligence (AI) in financial services continues to exercise C-suite minds. Not least, how to balance AI’s benefits to enhance the customer experience and improve back-office operations with the ethical challenges that AI presents.
Basel 3.1 Final Rules – What to look out for
The near-final Basel 3.1 rules on Credit Risk and Output Floor are expected on 12 September 2024. Ahead of this, we think there are several areas of the Bank of England’s proposals firms should be looking out for when the final policy is published. We discuss some of these below.
Credit Value Adjustment
The new Credit Value Adjustment (CVA) risk framework methodologies for calculating capital requirements will comprise of the Alternative Approach, the Basis Approach and the Standardised Approach.
Output Floor
One of the centrepieces of the revised Basel proposals is the updated Output Floor. The main aim of the Output Floor is to bring greater alignment between the capital requirements for the credit risk Standardised and Internal Models approaches.
Mapping digital transformation
Financial services organisations see digital transformation as a top priority. While the competitive landscape has been evolving following the arrival of digital-first challenger banks and fintech players, emerging technology and rising mobile service demands from tech-savvy consumers are now pushing traditional players to innovate, rethink business models and how to accelerate and scale their technology...
Financial services: confidence on the rise
Optimism in the financial services sector is riding high. So why is the financial services sector so confident and what needs to happen to ensure growth aspirations remain on track?
Prepare for the FCA and PRA’s proposed D&I regime?
Both the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) have highlighted Diversity and inclusion (D&I) as critical to their work on culture and governance. Benefits from D&I in the workplace include positive outcomes in risk management, good conduct, healthy working cultures and innovation.
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.
Model risk management
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’.
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.
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.
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.
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.
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 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.
Reporting for short-term business visitors
When UK employers host short-term business visitors (STBV) from abroad, they often create tax, social security and immigration compliance obligations for the business, even though the employees may spend relatively little time in the UK and UK PAYE income tax may not be payable on their earnings.
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.
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.
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.
Engaging Office Holders Off Payroll – The Pitfalls
It is commonplace for many financial services firms to engage office holders through an off payroll working arrangement, especially where duties are occasional. Here, we explore the potential pitfalls of such arrangements and how businesses can avoid significant liabilities arising on the fees they are paid.
Reducing remote workers compliance risk
Employees, who work remotely in a different country to where their employer is based, can give rise to a multitude of regulatory compliance obligations that employers need to understand and have a policy and process to manage.
Impact of the banking surcharge rate change
Recent modifications to the banking surcharge rules and the UK corporation tax main rate mean larger banks now face a combined tax rate of 28%, while many moderately sized banks may drop out of banking surcharge due to the increased £100m surcharge allowance available from 1 April 2023.
Introduction of Corporate Income Tax in Bermuda
On 8 August 2023, the Premier announced Bermuda's intention to implement a corporate income tax (CIT) for periods commencing on or after 1 January 2025. The decision to implement the CIT comes in response to the OECD’s Pillar 2 initiative to ensure large multinationals (>€750m consolidated group revenue) are paying a minimum of 15% tax in each jurisdiction in which they operate, and on this basis...
Liquidity risk management of equity funds
Subsequent to a recent review across asset management firms, the Financial Conduct Authority (FCA) has observed varying degrees of liquidity risk management standards across firms and has issued a warning to Authorised Fund Managers (AFMs) to better risk-manage their liquidity to avoid investor harm.
Strong and Simple – Does this apply to your firm?
The Strong and Simple regime could present potential advantages to firms, including cost reductions and increased competitiveness due to more proportionate regulatory requirements. This article aims to provide a clear understanding of which firms could be eligible for the new regime following PRA consultation (as of Q2 2023).
Country by country reporting is changing
16 August 2023 The Country by Country Report is on a journey from being a fiscal authority filing cabinet filler, to public reporting and a core component of Pillar 2 – Globe with many countries taking slightly different approaches.
Asset managers and ESG implementation
ESG-related regulatory requirements, and scrutiny, show no signs of abating.
GloBE – February 2023 significant changes
The OECD issues amendments to the operation of the Global Anti-Avoidance Base Erosion (“GloBE”) Model Rules (Pillar 2) and additional clarification of some areas.
Our top ten risks for firms in 2023
Overall, firms weathered the initial turmoil of the Covid-19 pandemic reasonably well thanks to a combination of deployment of technology to provide flexibility in remote working, and, in the case of banks, balance sheets which have been substantially bolstered in the aftermath of the financial crisis.
GloBE information return – what you need to know
The Global Anti-Base Erosion (GloBE) initiative seeks to reduce incentives for governments to offer tax incentives to drive economic growth. The initiative proposes a 15% global minimum tax. Progress continues to be made to implementation in 2023 most likely with effect for periods beginning on or after 1 January 2024. The rules will apply to multinational groups with consolidated accounting revenue...
GloBE - OECD announces major updates
In time honoured tradition, we have been given a festive present for the holiday period. The Organisation for Economic Co-operation and Development (OECD) has released its guidance on the Country-by-Country Reporting (CbCR) safe harbour mechanism the Global Anti-Base Erosion Model Rules (GloBE) information return and dispute prevention/resolution.
Pillar 2: December 2022 update
The political momentum behind Pillar 2 remains strong. It very much looks like it will happen and what is now important is exactly when each measure comes in, the reporting requirements and readiness for those obligations.
Legislation day 2022
On Wednesday 20 July 2022, the government released draft legislation for the Finance Bill for 2022 and the results of consultations. We were expecting more draft legislation but there are some HMRC recommendations that cannot currently be signed off by ministers until we have a more stable government.
Autumn Tax Administration and Maintenance Day
30 November 2021 For the second time in the same year, the UK Government has broken with longstanding tradition, where we would have had the UK Budget and tax consultations released simultaneously.
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.
Financial crime - Q4 2023
Changes in legislation have increased the requirements on organisations to identify and mitigate the risk of fraud committed for their benefit.
Digital assets - Q4 2023
This edition of our newsletter summarises a selection of developments from the UK and Europe and provides key updates on matters we have discussed throughout 2023.
Consumer Duty - Q4 2023
For many firms, the first half of 2024 will include undertaking the final major new action under the Consumer Duty – the first annual assessment by the board of the outcomes the firm delivers to its customers. Critical to the success of that assessment will be the quality of the data and management information (MI) that the firm gathers and assesses. This article discusses those two related topics.
Banking – Q4 2023
There was a flurry of regulatory activity in the lead-up to the festive period. Final Basel 3.1 for Market Risk, Credit Risk, CVA and Counterparty Risk were published. The PRA also finalised its disclosure and liquidity requirements for the Strong and Simple regime. There were also significant publications relating to Diversity & Inclusion and the Remuneration regime.
Insurance – Q4 2023
In this article, we highlight regulatory developments in Q4 2023 within insurance covering the Insurance Distribution Directive, Solvency II, third country branches, fair value, and appointed representatives (ARs).
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.
Banking – Q2 2023
Q2 2023 saw a number of regulatory publications concerning the banking sector. Most significantly, the Bank of England published a Supervisory Statement (SS 1/23) on Model Risk Management which sets out new regulatory expectations for non-IRB firms. We also discuss the outcomes stemming from a recent Bank of England Consultation Paper on ‘Solvent Exit’ (a new Recovery & Resolution concept from the...
Insurance – Q2 2023
UK regulators published a wealth of materials for insurers in the second quarter of 2023. Below we provide a detailed overview of these publications and highlight what firms’ management should focus on.
Climate and sustainability – Q2 2023
With an increasing emphasis on sustainability, international and UK oversight bodies issued new publications that foreshadow the imminent introduction of new standards. A summary of these updates is provided below.
Crypto – Q2 2023
As the spectre of high-profile incidents, including the collapse of the FTX trading platform, continues to hang over the crypto sector, global regulators have continued to implement and consult on stability-promoting regulatory measures. Among commentators, there is increasing sentiment that the development of clear cryptoasset regulatory environments will incubate, rather than inhibit, further innovation.
Consumer Duty – Q2 2023
With the Consumer Duty implementation fast approaching, the Financial Conduct Authority (FCA) released its latest findings from Q2 2023. In this article, we provide a concise overview of these publications and highlight what firms should focus on.
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.
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.