 A higher standard of consumer protection: New Consumer Duty
In an increasingly complex digital environment, and with more financial decisions now in consumers’ hands, we want to see greater consumer protection in retail financial services. We also want to see firms compete and innovate in the interests of consumers.
We see a range of good practice by firms in retail sectors. But we also see that firms are not consistently and sufficiently prioritising good consumer outcomes. This causes harm and erodes consumer trust.
That’s why we’re proposing to bring in a New Consumer Duty.
The new Duty would require firms to focus on delivering good outcomes for consumers at every stage of the customer relationship, supporting and empowering their customers to make informed decisions and act in their interests.
Our final consultation takes on board feedback to our initial proposals, published in May. It sets out more developed proposals for new rules and draft guidance to help firms prepare for its introduction.
Under the proposed new rules, firms would have to provide consumers with information they can understand, products and services that are fit for purpose and offer fair value, and helpful customer service.
The new Duty would also help create an environment for healthy competition between firms, encouraging them to be innovative in developing products and services that meet consumers’ needs. Firms would also have greater certainty about our expectations.
We’re keen to hear your views on our latest consultation. The consultation closes on 15 February and we expect to confirm any final rules by the end of July 2022.
Consultation on regulatory fees and levies
We’ve published our annual consultation paper on regulatory fees and levies, which sets out proposed policy changes to the way we will calculate our fees from 2022/23.
The paper includes proposed increases to the fees financial services firms pay to cover the cost of regulation.
When we consulted on our fee-rates in April 2021, we said we would undertake a review of our fees structure, including minimum fees, as part of our Transformation Programme. The proposed fee changes in the consultation would better reflect the costs associated with the authorisation and supervision of 51,000 firms throughout the UK.
As part of our transformation to become a more innovative and assertive regulator, we are also investing £120 million over the next 3 years to strengthen our ability to identify firms and individuals of concern. These changes are designed to benefit both consumers and firms.
In addition, we are proposing changes to the calculation of consumer credit firm fees to bring them more into line with other firm fees.
We will consider all feedback and expect to implement changes in time for the 2022/23 fee cycle. We welcome all feedback on the proposals and encourage responses to the consultation by 31 January.
FCA and Practitioner Panel Survey
On 3 December we published a report summarising the findings of our 2021 joint survey with the Practitioner Panel - the survey seeks feedback from FCA regulated firms on our performance as a regulator. Key themes included:
- A positive view, particularly amongst larger firms, of our performance during the pandemic.
- Some firms said that we have a reactive, rather than proactive, approach to risk. Some are concerned that there may be significant or emerging risks in the market of which we are not aware. This is a key area of focus for our transformation work.
- We’re concerned about the number of smaller firms that suggested they aren’t engaging with our consultation processes. From now on we’ll ensure all open consultations are included in our Regulation round-up newsletter. We’ve also trialled a new online response process to make it easier for firms to respond to consultations. The trial was successful, and we’ll roll out the new process in due course.
- Firms are often unclear why we collect the data we request from them. We’re feeding this finding into our work to reduce regulatory burden.
- There were concerns on the time it takes for us to complete authorisations but many of these respondents also pressed for more thorough background checks on owners of failed firms seeking to rejoin the industry.
We’ll use these results to better understand issues affecting all firms and to help improve how we operate. Read the report and find out more about the Practitioner Panel.
Apache Log4j Cyber Vulnerability
We are aware of a remote code execution vulnerability (CVE-2021-44228) that is affecting multiple versions of the Apache Log4j 2 library.
The National Cyber Security Centre (NCSC) is aware that scanning for this vulnerability has been detected in the UK and exploitation detected elsewhere.
The NCSC has published guidance for firms to help identify if they may be affected. It will be updated regularly by the NCSC where more information is available.
We recommend that all firms using the Apache Log4j 2 library review the NCSC guidance to ensure the safety of their firm’s systems. Please note any operational impacts associated with this issue should be escalated via normal supervisory reporting processes.
General Insurance Value Measures – Firm reporting
In PS20/9 we introduced rules requiring General Insurance (GI) firms to report value measures data to us, as well as value measures product governance rules. These help to address poor value of products and came into force on 1 January 2021, with reporting rules on 1 July 2021.
Firms’ first reports will be for the 6-month period covering 1 July 2021 to 31 December, and are due by 28 February 2022. Subsequent reporting will be submitted annually by 28 February for the previous calendar year. Firms must submit the reports via RegData. For more information visit our website.
Attesting compliance with General Insurance Pricing Practices rules
In PS21/5 we confirmed senior managers must attest annually that their firm has complied with our General Insurance (GI) Pricing Practices rules. This helps us to hold firms and individuals to account when ending ‘price walking’ for home and motor insurance.
We’ll send a survey in January to premium finance providers and firms with GI permissions to facilitate the first annual attestation. Firms receiving the survey must respond in full or provide a nil return by 31 March 2022. All subsequent attestation will be done via RegData.
Visit our website for more detail – this includes copies of the forms for the first and subsequent attestations for information purposes.
Maintaining access to cash: FCA and PSR statement
On 15 December the FCA and PSR published a joint response to the Cash Action Group’s (CAG) announcement that retail banks and building societies will create an independent body to assess the needs of local communities.
It’s crucial that access to cash is maintained for those who need it. Individual firms remain responsible for assessing the impact that closures may have on their customers. We will continue to supervise firms to make sure customers are treated fairly.
Changes to reporting requirements under UK EMIR
In November the FCA and Bank of England launched a joint consultation on changes to reporting requirements, procedures for data quality and registration of Trade Repositories under UK EMIR. These changes would be made by amending the relevant onshored Technical Standards and introducing new rules for Trade Repositories.
Our proposals aim to deliver a more globally consistent data set to better monitor for systemic and financial stability risk.
We’re also proposing measures for mandatory delegated reporting requirements, counterparty notifications and reconciliations processes, and the use of XML schemas and global identifiers. This is in addition to the new rules for TRs on the registration and reconciliation processes. There are also plans to streamline the process for registration.
Improving the Appointed Representatives regime
We’ve launched a consultation on improving the appointed representatives (AR) regime.
Our proposals would improve principals’ oversight of ARs, requiring them to provide us with more information on their ARs. This would allow us to act more quickly to spot risks.
Our proposed changes aim to address the harm in this market while retaining the cost, competition and innovation benefits that the model can provide. This harm often occurs because principals don’t perform enough due diligence before appointing an AR, or from inadequate oversight and control after an AR has been appointed.
We’re inviting feedback on this consultation by 3 March 2022.
Compensation framework review
We’ve published a discussion paper as part of our review of the compensation framework within which the Financial Services Compensation Scheme (FSCS) operates.
We’re asking fundamental questions about the purpose, scope and funding of the FSCS. We want to hear ideas for improving the compensation framework so that it continues to provide an appropriate level of protection for consumers, while ensuring the funding arrangements are sustainable and costs fairly distributed.
Our review is in addition to the action we are already taking to tackle the root cause of high FSCS costs.
Have your say by 4 March 2022.
Event: Register for our operational resilience webinar
Are you on track to comply with the operational resilience policy?
We’re hosting a webinar focused on operational resilience on Thursday 27 January 2022, from 10:30 to 11:30.
This will be a chance to hear from us ahead of the first policy milestone at the end of March 2022. We’ll also be discussing firms’ progress with implementing the policy and sharing our observations.
You’ll hear from representatives from the FCA, Bank of England and Prudential Regulation Authority. You’ll also have an opportunity to submit questions to our speakers.
Register to attend.
Update on the Transforming Data Collections Programme
In September, the Bank of England and FCA launched a joint transformation programme which will transform how we collect data from the UK financial sector.
We’ve published a progress update with comments from Gareth Ramsay (Executive Director Data and Analytics & Chief Data Officer, Bank of England) and Ian Phoenix (Director of Intelligence and Digital, FCA) on the achievements of the programme so far, and details on expected resource and budget requirements for 2022/23.
We held a Town Hall event on Thursday 9 December to provide a more detailed insight into the programme and its future plans. You can access a recording of the event and the presentation slides under the ‘Latest news and updates’ section of the Bank of England's Transformation Data Collection Webpage.
To find out more information on how you can get involved with the programme, please email TDCProgramme@fca.org.uk.
Latest Mortgage Lending Statistics
Together with the Bank of England, we published the latest Mortgage Lenders and Administrators Statistics, covering the period up to the end of Q3 2021. The Mortgage Lenders and Administrative Return (MLAR) dataset gives us a range of prudential and conduct of business mortgage data. It enables us to spot the latest trends, and helps firms and consumers get a greater understanding of the UK's mortgage market.
The latest data shows that the outstanding value of all residential mortgage loans was £1,601.2 billion at the end of 2021 Q3, 4.9% higher than a year earlier. Visit our website for further information.
Retirement Income Market Data Update
We’ve published our latest retirement income market data update. Our analysis summarises the latest data covering from 1 April 2020 to 31 March 2021. The data helps us to monitor developments in the market, for example, to track what action consumers take the first time they access a pension pot.
The latest data shows that total number of pension plans accessed for the first time in 2020/21 decreased by 12% to 596,080 compared to 2019/20 (673,831). See our website for further information.
Update on IFPR
Our new prudential regime for MiFID investment firms, the Investment Firms Prudential Regime (IFPR), will come into force on 1 January 2022.
On 26 November 2021 we published our third policy statement, PS21/17 . You should familiarise yourself with our final rules and our additional IFPR policy statements: PS21/6 and PS21/9, so you’re ready to meet the implementation date. Our IFPR webpages have more detail.
In November, we held 2 webinars for firms - to watch them see our website. You’ll need to register at the link to access the recorded webinars and slides.
FCA confirms cap on CMC charges
As part of our work to ensure consumers get value for money when using claims management companies (CMCs), we’re introducing new rules from 1 March 2022 that will cap the fees consumers can be charged for financial services claims.
Firms must be ready to comply with our new rules by 1 March 2022 (in 3 months). For more information, please see our policy statement.
Helping mortgage prisoners
Our data is helping the Government consider whether there are practical and proportionate solutions to help mortgage prisoners, people who are unable to switch to a new mortgage deal.
The Government and industry will use our Mortgage Prisoner Review to consider if there are further practical and proportionate solutions for mortgage prisoners. We will continue to support them to do this and we will focus on those areas in the market where we identify the greatest harm which could affect mortgage prisoners and other borrowers.
Boosting growth and innovation on UK stock markets
We've confirmed a series of rule changes so that the UK’s public markets remain a trusted and attractive place to list successful companies.
The new rules came into force on 3 December 2021, except for minor changes to modernise and streamline our primary markets rule books, which will come into force on 10 January 2022.
Issuers and applicants to list should familiarise themselves with the rule changes set out in this Policy Statement. We have provided a transitional approach in relation to the minimum market capitalisation, for current applicants to list and for existing listed shell companies.
FCA publishes final rules on SCA and updated approach to payments and e-money
To ensure consumers can continue to safely access and make online payments, we’ve updated our approach to payments and e-money firms, and set out final rules for Regulatory Technical Standards on Strong Customer Authentication (SCA).
It’s essential our regulatory expectations evolve with the changing payments landscape to support competition and innovation, to ensure consumers can continue to benefit from the development of new services, and to minimise harm if things go wrong.
Firms should read our publications and ensure they understand the changes and any updated expectations. For more information see our policy statement and SCA page.
So long LIBOR
Edwin Schooling Latter, Director of Markets and Wholesale Policy and Wholesale Supervision delivered a speech on 8 December outlining the remaining actions we expect firms to take as the end of the year approaches, and most LIBOR rates will stop being calculated or become unrepresentative.
Along with the PRA, we’ll continue to monitor UK-supervised firms’ wind-down of their legacy LIBOR books, stopping their new use of US dollar LIBOR, and their preparations for the end of the US dollar LIBOR panel.
LIBOR transition: reminder for firms
Over the coming weeks supervised firms will be taking actions to convert outstanding LIBOR trades to RFR equivalents and applying the ISDA 2020 IBOR Fallbacks Protocol to relevant derivative trades.
We remind firms that they should notify us in time of any material issues. You should make notifications to us through your usual supervisory contact.
Stronger nudge to pensions guidance
On 1 December we published final rules which will require pension providers to give consumers a stronger nudge to Pension Wise guidance when they decide to access their pension savings. Affected firms must comply with our final rules by 1 June 2022.
Our focus is on making the pensions market work well, including ensuring consumers have the right level of advice and guidance to help them make informed pensions decisions. We’ve worked closely with the DWP, who are implementing the stronger nudge within occupational pension schemes.
We will continue to work with Government and regulatory partners on what more should be done to guide consumers in their pension decisions, and to increase take-up of Pension Wise guidance.
Consultation on non-workplace pensions
In CP21/32 we are consulting on proposals to support customers who find it hard to identify appropriate investments for their pension savings. We propose that firms operating non-workplace pensions offer new, non-advised customers a ready-made, standardised investment solution (a ‘default option’) and make this available alongside other investments. We are also proposing that firms warn customers holding high levels of cash that their savings are at risk of being eroded by inflation, to prompt them to consider investing in other assets with the potential for growth.
Please send us your comments by 18 February 2022.
See the latest speeches from our executive team.
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