Author: AxiomHQ – axiomhq.com
The FS Regulatory Initiatives Forum is still relatively new. In our earlier publication, we reviewed this collaborative approach towards financial services in the UK. The aim is to coordinate efforts to help firms manage regulatory change.
In November 2021, the Forum issued the latest regulatory initiatives Grid covering the next 18-24 months. What can we expect in 2022 and beyond?
This edition coincided with COP 26 and not surprisingly, there are a number of climate related initiatives. This is in line with the UK’s goal to become the world’s first net-zero aligned financial centre. December saw the FCA publish its final rules on ESG disclosures affecting listed issuers, asset managers, life insurers and FCA-regulated Pension Schemes. There is more to come on ESG in 2022 with the regulator seeking engagement on Net Zero Transition plans and sustainability in the capital markets. The Financial Reporting Council (FRC) is also set to publish a list of signatories to the UK Stewardship Code, which “aims to demonstrate responsible allocation, management and oversight of capital to create long-term value” for clients.
Aside from ESG, other initiatives affecting financial services include:
- LIBOR. Ensuring an orderly transition on 31 December.
- Operational resilience. The first milestone at the end of March 2022 sees firms identifying important business services and impact tolerances as well as mapping required resources to maintain services. In the meantime, the regulators are focusing attention on the resilience of third parties (and sub-contractors). We can expect further consultations with details of proposals for a register of outsourcing and third-party risk management.
- Conduct
- Cost-cutting/Omnibus
- Competition
Conduct initiatives range from FCA’s new Consumer Duty with final rules due in Q3 2022.
It also sees the HMT reviewing money laundering regimes and the high-risk countries listing. One joint consultation between HMT and the FCA looks at the financial promotions regime and plans to implement a regulatory gateway for authorised firms before they may sign off unauthorised firms’ promotions. Current plans indicate that the gateway will open in 2023.
Cost-cutting/Omnibus category encompasses several initiatives including:
- Additional focus on audit and corporate governance. The consultation period closed in the summer, but further updates are due.
- Approval of holding companies. Certain holding companies linked to banks and designated investment firms must be either approved by the PRA or exempt by 31 December 2021.
- Review of the Appointed Representatives regime. FCA issued its consultation paper in November and is expected to issue final rules in Q2 2022. Proposals seek to reduce harm by enhancing the rules for Principal firms.
- Future Financial Regulatory Review. The government issued its second consultation paper which closes in February 2022.
Whilst the above is not an exhaustive list, there is certainly a great deal of work on the horizon.
Firms need to review consultation papers and policy statements to identify those areas that will impact their business. They should also start planning now in terms of resources required to implement any changes and provide ongoing guidance to boards.
