What Does the FCA’s Business Plan Look Like?

The Financial Conduct Authority (FCA) issued its business plan earlier this year, as well as its focus for the upcoming four quarters. Kicking off with some stats – a mix of sobering and positive – the paper gives a clear outline of the FCA’s proposed, cross-sector, regulatory oversight. One of the greatest challenges for the industry at present is the implementation of MiFID II provisions; 3rd January  2018 is looming. The FCA makes the point that this will facilitate the introduction of ‘major reforms to improve resilience and strengthen integrity and competition in wholesale markets’. One can comfortably surmise that the common goals of the European Securities and Markets Authority (ESMA) and ultimately the national regulatory oversight bodies are: to create a protectionist environment, that engenders transparency and probity in financial services.

The Challenges and Policies

Across all financial sectors lies the risk of cyber-attacks. With the impending implementation and governance of the General Data Protection Regulation and potential fines of up to 4{dbfcf201b6c5c222e259d4f2fe846e83faab30e5cf4cea18302fdf949135a1d7} of company revenue or €20m, organisations’ technological and operational resilience must be second to none. The FCA deems these qualities pivotal pieces of the cybersecurity jigsaw; it aims to police cyber capabilities and monitor financial crime and all major outages during the upcoming year.

Whilst 2015/16 saw banks and insurers bring about the operational changes borne out of the Senior Managers and Certification Regime (SMCR), during 2017/18, the FCA plans to oversee the resulting culture and governance of this significant shift in responsibility. Currently under consultation is the extension, to be implemented by 2018, of SMCR to all firms covered by FSMA. This would cement the prevailing accountability of senior managers’ individual areas of business within the industry.

The theme driving the most recent directives and regulations are placing the ball in the customers’ court. The dramatically changing financial landscape is being moulded by the General Data Protection Regulation, the Payment Services Directive 2, to name but a few. The Open API world further allows the customer to have greater choice and engagement with their banking decisions. The FCA is likely to zero in on firms’ development in digitisation and automation and stewardship of customer data with a critical eye, to ensure there is no abuse. Client centricity is key: the digitisation of our financial activities is the current agenda for incumbents’ senior execs. Not least will this facilitate existing clients’ demands, but the mindset prevails that this will be the catalyst for financial inclusion.

Looking Ahead

MiFID II implications are beginning to take shape, however, there is much to be done. The FCA recognises that MiFID II is post-crisis regulation; it is driving reforms that will promote cross-sector market integrity and competition, and consumer protection. Firms’ annual budgets will now, more than ever, be targeted towards improving IT systems and infrastructure, develop data capabilities, and ensure operational risk is kept at bay.

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