Regulatory grid gives insight into future UK financial services policy

Out-Law News | 03 Nov 2021 | 12:52 pm | 2 min. read

Planned regulatory initiatives in UK financial services over the next two years will major on promoting greater sustainability, diversity and operational resilience.

Details of the initiatives that UK authorities active in the financial services sector will work on in the next 24 months were outlined in an updated regulatory grid. In total, 134 separate initiatives are either ongoing or planned. The grid, available for the first time in an interactive dashboard, accounts for work being undertaken by the Treasury, Bank of England (BoE), Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), as well as the Payment Systems Regulator, the Pensions Regulator, the Financial Reporting Council, the Information Commissioner’s Office, and the Competition and Markets Authority.

“Not surprisingly ESG matters feature heavily in this latest edition, particularly environmental initiatives,” said Elizabeth Budd, an expert in financial regulation. “However, new proposals include a proposed review of the appointed representatives’ regime with a consultation due this month and policy statement next summer. The FCA has previously flagged their concern regarding the regime and the risks that arise.”

“Another new proposal is a discussion paper from the BoE, PRA and FCA on the role of critical third parties which was flagged last month by the BoE in its report on financial policy. The BoE considers that additional policy measures are likely to be needed to mitigate the financial stability risks stemming from concentration in the provision of some third-party services. These policy measures could include an appropriate framework to designate certain third-party service providers as critical; resilience standards; and resilience testing,” she said.

A series of initiatives linked to the growing environmental, social and corporate governance (ESG) agenda are outlined in the grid. These include the planned introduction of climate-related disclosure rules for a range of financial institutions and public companies, as well as FCA plans to scrutinise the ‘net zero’ transition plans of regulated firms in the first half of next year.

Increased regulation on matters of diversity and inclusion can also be anticipated by financial services firms and public companies. According to the regulatory grid, the BoE, PRA and FCA will consult on measures to improve diversity in decision-making in financial services in the first half of 2022 and finalise a policy statement on the matter before the end of that year. The FCA is also likely to issue a final policy statement on proposals to require greater transparency on the diversity of public company boards and executive management teams in early 2022 – including the potential introduction of new annual reporting requirements and ‘comply or explain’ targets on gender and ethnic diversity.

The grid highlights existing deadlines for policy and regulation that has already been set, such as the 14 March 2022 deadline for implementation of strong customer authentication standards in e-commerce, and the 31 March 2022 deadline for beginning to implement the FCA and PRA’s new requirements around operational resilience. According to the grid, a further PRA consultation on operational resilience incident reporting is expected in the latter half of 2022.

The grid also lists ongoing work. This includes the strategic reviews being undertaken into aspects of UK financial regulation, including the future regulatory framework review, the Treasury’s review of the ‘Solvency II’ regime impacting insurers, and the payments landscape review. Other ongoing initiatives include the work to phase out LIBOR, the development of FCA rules designed to support the creation of a new pensions dashboard, and the move to update the UK’s listing rules.

Other initiatives of note include the planned consultation on the introduction of a new consumer duty before the end of the year, as well as the trailing of next steps to support a shift to ‘open finance’, which are anticipated in “the coming months”. A final report on AI in financial services by the Artificial Intelligence Public-Private Forum, which was set up by the Bank of England and FCA, is also expected in the first three months of 2022.