With the baking temperatures of summer on the wane we now face the reality of back-to-school and back-to-work. To ease the transition, we’ve produced a round-up of some key regulatory developments from mid-July to end-August.
Once again we’ve asked the experts in our EMEA Centre for Regulatory Strategy to tell us which regulatory developments stood out most for them. The results are attached below and are organised by sector (banking, capital markets, insurance and investment management) and by theme (sustainable finance, innovation and payments, conduct, and operational resilience and outsourcing). Here are some of the issues that particularly caught our eye.
In the UK, the dominant theme over the summer was the impact of the political agenda on regulation. The most direct expression of this was the Financial Services and Markets Bill, which we summarise here. The Bill lays the foundation of the Government’s vision of the UK’s future regulatory framework. It gives the UK regulators more rule-writing authority and, as a quid pro quo, makes them subject to a range of new accountability measures and a secondary objective to facilitate growth and competitiveness.
At the same time, the future role and scope of financial regulators is being debated. HMT and the PRA have set out their own, quite different positions on the UK’s review of Solvency 2. The ball is now in HMT’s court. The Chancellor will decide in the autumn whether to take further powers for the Government to intervene in financial regulation, in the public interest. And there has been media speculation that Liz Truss, should she become Prime Minister, will initiate a review of the regulators.
These debates will take place at a time when the risks to customers and to financial services firms will be high, and rising, because of the cost-of-living crisis. The FCA's new Consumer Duty Principle permeates almost everything else that the FCA does – there are references to it in the FCA’s communications over the summer on collecting loans owed by SME customers, on financial promotions of buy-now-pay-later loans and on the new requirements for Appointed Representatives.
European regulators have also been busy: the near final text of the Digital Operational Resilience Act (DORA) has been published and is expected to be ratified in the autumn. The DORA will require firms to make significant improvements to their operational resilience and cyber risk management framework. EIOPA consulted on differential pricing approaches, noting that while some differential pricing is justified, price walking can lead to unfair customer outcomes, and firms that use differential pricing will need to ensure they can justify it.
Encouraging innovation and competition continues to be a government priority in both the UK and EU, but increasingly - at least in the UK - the timeline for passing supporting legislation defaults to “when Parliamentary time allows”. Responses to macro-economic pressures will continue to compete for Parliamentary and regulatory time. We see some of these pressures already causing delays in key policy areas such as digital assets and sustainability.
The attached presentation provides more detail of what regulators have been up to over the summer period. We trust you will find it interesting and useful.