The Business Plan lays out the FCA’s work priorities for the year. These are drawn up under their 3 operational objectives of protecting consumers, promoting competition and enhancing market integrity, with the overall goal of helping markets to work well.
The Plan looks at key market trends and tries to identify emerging risks that may require intervention at some point.
The FCA have included the following priorities in the Business Plan for the coming year:
- Given that the Brexit scenario has the potential to change quite drastically and rapidly, preparations for leaving the EU will be their top priority.
Culture and Governance
- FCA plans to review firms’ employee renumeration arrangements to determine whether firms are encouraging behaviour which harms consumers and markets.
- Reaffirm their plan to expand Senior Managers & Certification Regime (SMCR) to all firms in December 2019.
- Further to this is the establishment of the ‘Directory’, which aims to be a ‘user-friendly, public source of information about individuals in key roles who will not be included on the Register as senior managers as part of SMCR. It is due to go live in March 2020. The Senior Managers responsible for certifying their staff will also be responsible for submitting information to the Directory.
- FCA will review their own expectations of firms’ change management capabilities. Aim is to help firms manage reductions in their ability to deliver services and resulting harm from failed service delivery.
- Primarily related to technology, highlighting the management of IT systems and data transfers as their biggest concern.
- FCA will explore the use of technology to be more intrusive in assessing the effectiveness of firms’ own systems and controls.
- Aiming to have a swifter response to financial crime incidents overall.
Fair Treatment of Existing Customers
- We can expect the FCA’s response to the Fair Pricing in Financial Services consultation paper in the 2nd quarter of this year.
FCA is currently undertaking a market study of the general insurance industry, primarily concerned with the fairness of pricing practices. They indicate than an interim report will be released in summer 2019.
Innovation, Data & Data Ethics
- FCA will investigate the implications of machine learning and automated decision making on competition and fairness in the financial services industry.
- Related to this is the ethics of automated decision making, accountability and public understanding of these new technologies.
- FCA will be investigating the potential market changes that may arise from intergenerational differences and demographic change in the UK, and how consumer needs are changing as a result.
- Will consult on intergenerational issues and investigate whether the FCA’s regulatory framework and overall approach needs to change to meet new consumer needs.
- This will involve a range of conferences and a discussion paper.
The Future of Regulation
- Outlines its intention to provide feedback to the Duty of Care consultation in spring 2019.
- Further work on post-Brexit transition regulatory framework
General Insurance and Protection
- FCA will undertake further supervisory work to determine whether they need to build on existing work into general insurance distribution chains, including pricing, renumeration and proposed non-handbook guidance changes.
- Receiving responses to their General Insurance Value Measures consultation, following the GI add-ons market study.
- Primary concern is high-cost, short-term credit, which they plan to address with findings from the high-cost credit sector review
- Will conduct additional work on business models which rely on consumers who cannot afford to repay, or ‘unaffordable lending’.
- FCA also plans to launch a Credit Information Market Study in summer 2019 to build a better understanding of how credit worthiness is assessed and understanding the potential for consumer harm is credit worthiness assessments, as the information can affect credit pricing and accessibility.
There is little evidence from the Business Plan that the FCA’s work on motor finance is one of its leading workstreams for the coming year. There is no new work planned directly in this area beyond what has already been announced in the Motor Enquiry final report. Emphasis appears to be placed on motor insurance pricing, rather than motor finance – indeed, the motor finance market does not receive a single mention in the plan. That said there will be areas of the Business Plan that will affect Motor Retailers such as the Senior Managers and Certification Regime, remuneration arrangements and Value Measures.