Britain’s Financial Conduct Authority released a broad agenda for the upcoming financial year, which includes a new focus on firms’ systems and controls relating to financial crimes.
Created in the wake of the financial crisis, the FCA took over conduct supervision of all regulated financial firms in the U.K. and the prudential supervision of firms not falling under the purview of its tandem regulator, the Prudential Regulation Authority, in 2013. It is tasked with overseeing the functioning of relevant markets, protecting consumers and the integrity of the U.K.’s financial system, and promoting competition.
The FCA’s Business Plan for 2015/16 outlines a continued focus on culture and other threats to market integrity, along with in-depth looks at the pensions sector in particular and the creation of two new divisions for supervisory and authorisation functions.
“This is an important day in terms of setting out our priorities for the year ahead and also giving firms greater clarity on how they can expect to work with us,” FCA Chief Executive Martin Wheatley said in a statement. “The Business Plan is set against the backdrop of the most fundamental changes to pension policy we have seen in over a generation. Therefore we will be looking at how the market is working and in particular, how the industry is adapting to this considerable change and what it means for consumers. This is exactly the sort of work that is expected of the FCA, and I believe is a fundamental benefit to consumers and industry.”
On the pensions front, the FCA pledged to examine the sales practices of pension providers in order to determine whether those practices have improved since last year’s review of annuities sales. It will also look into how firms are helping consumers make informed choices on new pension options ushered in by government reforms, and continue to review consumer outcomes for pensions and retirement income products.
On financial crime, the FCA said it will focus on anti-money laundering and anti-bribery and corruption efforts. The authority plans to implement an enhanced AML supervision strategy, which will assess AML and ABC controls at major firms. It also pledged to continue working with smaller firms at greater risk of being exposed to financial crime. The FCA pledged to conduct assessments of specific financial crime risks and make recommendations to firms about how to make controls more effective.
“Firms play a key role in the U.K.’s fight against financial crime, and we expect them to have effective, proportionate, and risk-based systems and controls in place to ensure their business cannot be used for financial crime,” the business plan stated. However, the plan continued, the FCA wants firms to avoid overly broad de-risking decisions that would affect entire categories of customers or sectors.
Boosting individual accountability will remain a priority next year, as the authority will oversee the implementation of accountability regimes and monitor firms’ culture, remuneration codes, and whistleblowing procedures.
The FCA is planning a review of the mortgage market, including barriers to competition and consumers’ ability to access credit or switch mortgage providers. The regulator will implement and review the consumer credit regime and practices in the sector. The FCA also will monitor poor culture and practices in consumer credit affordability assessments.
The plan includes several areas of focus for the financial services sector, including a sweeping market study of competition in investment and corporate banking, the implementation of MiFID II and revamped market abuse regulations, and a review of fees paid by investors in the asset management field. The authority also comes into new powers in April to enforce rules against anti-competitive behavior in the financial services sector. The FCA’s Risk Outlook outlines seven top risks the financial sector should take into consideration.
Other priorities include contributing to international benchmark reform, monitoring technological developments, and conducting a study on how the insurance sector is using Big Data. Continued areas of focus will be poor culture and controls and the impact of large back-books on firms’ dealings with customers.
Two new divisions will be created for the FCA’s supervisory and authorisations work. Tracey McDermott, who previously headed up enforcement for the agency, will take over the new Supervision Investment, Wholesale and Specialists division. Linda Woodall, formerly director of mortgages and consumer lending for the FCA, was named acting director of the new Retail and Authorisations Division.