This is the second of two short blogs on the FCA's Business Plan 2018/19, published today. The first looks primarily at Brexit, which dominates, while this one identifies six other areas that deserve special attention.
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Taking a step back from the FCA Business Plan’s inevitable focus on EU Withdrawal, it’s worth devoting attention to six areas, each flagged in Andrew Bailey’s introduction, where the regulator is aiming to move beyond business as usual. Unsurprisingly, each still has a Brexit flavour, together looking to shape the sort of regulator the FCA wants to become post-withdrawal. For that reason alone, they are worth examining in more detail:
1. Cyber and financial crime: There is clear movement in both these (closely related) areas, as the UK seeks to bolster its defences. From the setting up of OPBAS (to help combat money laundering) to a risk assessment of the e-money sector, a range of initiatives is under way. As ever, the challenge will be coordination, and the conclusions of the Financial Action Task Force (FATF) evaluation in October will be eagerly awaited.
2. Big Data and Open Banking: The FCA again has a range of initiatives here, this time seeking to establish the UK as the foremost international centre for innovation (see also below), with Regtech a key focus. In this it benefits from competition being one of its operational objectives but there will be challenges ahead, glimpsed in the text, on balancing opportunities in these fields against the risks to consumers, not least around data security.
3. FCA Innovate and Sandbox: The FCA has rightly won widespread praise for this initiative, originally established under Martin Wheatley in mid-2014. The recent consultation on the shape of a global sandbox is a logical and welcome next step.
4. MiFID II: The FCA looks to be focusing on making sure the new directive’s expanded scope is reflected on the ground. Related, there is also an undertaking to publish an approach document on market integrity, though this isn’t due until Q1 next year. There is little sign of the post-Brexit UK wanting to reframe its approach in this area.
5. Firms’ culture & governance (SM&CR): The Business Plan confirms that SM&CR is going to be central to the FCA’s work on firm culture. Final rules are due to be published in the summer, probably early given the generally positive feedback and the immediate imperatives of Brexit. This is another areas where the UK is seeking to establish itself as an international leader post Brexit.
6. Pensions: This is the only one of the six with a primarily domestic focus. In this case, its importance flows from two sources: long term trends in the market; and the more immediate problems caused by the Government’s 2015 pension freedom reforms – a Select Committee report on this is in the works. Earlier this year the FCA and The Pensions Regulator announced work on a joint pension strategy, originally due late last year, and despite Brexit this shoul continue to be an area of high activity.
Looking across these wider priorities, it is striking how little sign there is of any post-Brexit bonfire of regulations, arguably the reverse as the UK seeks to build a twin reputation of high standards and world-leading innovation.
The priorities in this year’s Business Plan reflect the high level of resource the FCA needs to dedicate to European Union (EU) withdrawal, given its impact both on our regulation and the firms we regulate.