Ash is managing director at RWA. He has over 15 years’ experience in the legal and compliance field and ten years’ in broker sales and leadership roles in national and global insurance firms.
He is highly skilled in the application of risk-based regulation, working closely with businesses at executive and board level to develop commercially viable, compliant systems and controls. Ash is adept in providing solutions-based interpretations of the FCA’s technical standards and facilitating the transfer of compliance skills and education needed for businesses to self-manage their own compliance and training needs.
FCA Outlines Response to Covid-19 and Expectations for 2020
In a recent speech, delivered at PIMFA’s Virtual Festival, the FCA has outlined its response to the Covid-19 pandemic and its expectations for 2020. Megan Butler, Executive Director of Supervision – Investment, Wholesale and Specialists at the FCA talks about the industry’s response to coronavirus and its priorities going forward. Key areas of focus are identified as operational resilience in light of coronavirus, financial resilience and acting with integrity.
It is felt that, “in operational terms, the industry has responded well” and “overall it feels as if firms are coping and adapting to this new normal.”
The FCA’s Business Plan, published in May, sets out the priority areas for its work over the next 1 to 3 years. The five key drivers of its response to coronavirus are ensuring that:
- there is a good level of operational resilience
- it understands firms’ financial resilience so that firms can fail in an orderly manner
- markets can function enabling price formation and orderly trading activity
- customers are treated fairly
- customers are aware of the risk of, and protected from, scams
What are the FCA’s expectations of firms during this time?
Firstly, it is expected that firms are operationally resilient. This is particularly relevant during the current crisis.
The FCA states that it expects “all firms to have contingency plans to deal with major events and that these plans have been properly tested.”
As we reported in January, the FCA is consulting on operational resilience. The key messages set out in this consultation (which now closes on 1 October 2020) are:
- The proposed requirements and expectations for firms and financial market infrastructure (FMI) to identify their important business services, by considering how disruption to the business services they provide can have impacts beyond their own commercial interests.
- That firms must set a tolerance for disruption for each important business service and ensure they can continue to deliver their important business services. They must ensure they are able to remain within their impact tolerances during severe but plausible scenarios.
- The requirements to map and test important business services to identify vulnerabilities in their operational resilience and drive change where it is needed.
The FCA is actively reviewing the contingency plans of a wide range of firms. Such reviews include a firms’ assessments of operational risks, their ability to continue to operate effectively and the steps they are taking to serve and support their customers.
It's important that firms continue to focus on their operational resilience as circumstances change and government guidelines are updated – the coronavirus situation continues to develop quickly so staying up to date and as prepared as possible is key.
The second expectation outlined by the FCA is financial resilience.
The FCA states that it is “already beginning to see a key impact of coronavirus in its significant downward pressure on many firms’ revenues […] Financial viability concerns already present in some firms will be amplified and otherwise financially sound firms may become vulnerable.”
As part of its work on financial resilience, the FCA has issued a coronavirus impact survey to around 13,000 firms to obtain a more accurate view of firms’ financial resilience as a result of coronavirus.
The FCA is concerned that, “financial pressures could give rise to harm to customers if firms cut corners on governance or their systems and controls – for example, increasing the likelihood of financial crime, poor record keeping, market abuse and unsuitable advice and investment decisions.”
The future of regulation
The regulatory future is touched upon in the speech and there is an emphasis on the perspective of end users of financial services, and their needs and vulnerabilities. The current regulatory framework is based on Principles, high-level rules and, where necessary, detailed rules and guidance.
However, it is felt that “there is a strong case for taking a step back and assessing whether the regulatory framework is delivering against more than just rules, but rather against ultimate outcomes for users of financial services.”
The FCA states that lessons will be learned from the coronavirus pandemic in terms of acting quickly in response to situations such as this, but emphasises that it will look at its entire system in terms of the data it collects to how it supervises firms and individuals.
For further information and guidance on the FCA’s response to the coronavirus outbreak, go here: https://www.fca.org.uk/coronavirus