A data-driven industry needs a data-led regulator:
Our approach to innovation & SupTech
My role at the FCA is to ensure that we as a regulator leverage data science, digital technologies, and intelligence capabilities to keep pace with the technological changes that are transforming financial services. In short, a data-driven industry needs a data-led regulator.
I recently delivered a speech at our RegTech Forum to share my plans for our Data Strategy and driving ‘innovation’ at the FCA. Across the Data, Technology, and Innovation division, we are investing heavily in the skills and technology foundations that will make the FCA a regulator fit for a digital future.
For many years the FCA has been increasing its use of data. This year we are seeking to achieve a step change on that journey. We are working across the FCA, building digital regulation bottom up and top down. Our work programme stretches from fast-paced innovation driven by data science projects to strategic programmes including the build of a new Digital Unified Intelligence Environment that fundamentally re-imagines how we collect intelligence, analyse data, and take action in a more joined-up way. Our Digital Sandbox initiative is an example of us experimenting and iterating our approach.
We are using a customer mindset in partnering with the business teams in policy, enforcement, and supervision. We are performing user journey mapping to understand the key challenges faced in their roles, and identifying data and technology solutions to enable proactive and assertive regulation.
Find out more about the key ingredients that underpin the Data Strategy and how we'll coordinate a spirit of innovation, by watching the full speech here.
Please see our full statement on our website for our expectations of firms around sanctions considerations.
First Portfolio Letter for credit rating agencies
This month we published our first Portfolio Letter for credit rating agencies (CRAs). We supervise all firms as members of a Portfolio of firms that share a common business model. This letter communicates what we expect CRAs to do to minimise risks to consumers, market integrity or competition from failures to meet regulatory requirements. We have noted some potential risks and we expect firms to consider and address these issues.
While regulatory and mechanistic reliance on credit ratings may have decreased since the global financial crisis, the lack of readily available alternatives to ratings means they remain systemically important and embedded in capital markets. We believe there are different degrees of conflicts of interest in the credit ratings business model and firms must demonstrate their ability to effectively manage these potential conflicts.
In line with our Approach to Supervision, we take a holistic approach to supervising this portfolio. If a CRA or the group to which it belongs also undertakes unregulated activities, we may assess these as part of our supervision of the regulated activities.
We expect all firms to have a sound governance and oversight framework, suited to the size and nature of their operations, which focuses on the delivery of independent and high-quality ratings and methodologies by capable staff, using robust systems.
Our key supervisory priorities address the harms relating to the ratings process and methodologies, governance and oversight, market and perimeter risks, and operational resilience and resourcing. These priorities may change to reflect the evolving nature of the credit ratings business and markets.
Attesting compliance with General Insurance Pricing Practices rules
In PS21/5, we confirmed senior managers must attest annually their firm has complied with our GI Pricing rules. All firms setting home and motor insurance prices including where authority is delegated, must attest that they comply.
We sent a survey in January for the first annual attestation. Firms that received it must respond in full or provide a nil return by 31 March 2022. Future attestations will be via RegData.
Our website includes an update to our Q&As, including Q4.4 on insurers that delegate the setting of the risk element of the price to another firm, and which firm is responsible for attesting compliance with the rules.
General Insurance Value Measures 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.
2022/2023 fees and levies
Firms that are intending to cancel their permission and do not wish to be liable for next year’s annual fee (1 April 2022 to 31 March 2023) need to apply to cancel online, through by 31 March 2022. If they do not they will be liable for the full annual fee.
PRIIPS update
Parliament legislated to extend the UCITS exemption in the PRIIPs Regulation (as enacted in retained EU law) by 5 years, from 31 December 2021 to 31 December 2026.
This extension means that UCITS funds offered to UK retail investors must continue to supply a UCITS key investor information document (KIID).
We intend to make consequential amendments to the UK PRIIPs Regulatory Technical Standards (RTS) and the associated Handbook guidance to reflect the new end date of the UCITS exemption. We issued a statement outlining that we do not propose to take enforcement action against firms for breach of Article 14(1) if they provide disclosure in accordance with Article 14(2) of the PRIIPs RTS.
The Temporary Transitional Period (TTP) is ending soon
To prepare for the end of the Brexit Transition Period, we onshored, and where necessary adapted, EU legislation to ensure it was workable in a UK-only context. Some requirements on firms and other regulated persons changed at the end of the Transition Period and to avoid disruption we used our Temporary Transitional Power (TTP) to give firms time to adapt to the new regime. With the end of TTP fast approaching, we expect firms to be fully compliant with onshored regulatory obligations by 31 March 2022.
New investment scams campaign has launched
On 10 February we officially launched our new ScamSmart Investments Campaign. The campaign is live until 31 March 2022 and is designed to help protect consumers from investment fraud and aims, to increase awareness and educate consumers on the signs of an investment scam, and increase use of the Warning List. This tool details the risks associated with an investment opportunity and lists firms we know are operating without authorisation.
The campaign shows that no matter who you are, you could be targeted, and the best form of defence against a scam is to be aware of the warning signs. This should prompt the person listening or seeing the adverts to check the FCA Warning List and understand the scam tactics that could be used against them.
Finalising LIBOR transition
On 31 December 2021, most LIBOR settings were published for the final time. This marked a critical step in the necessary shift in global interest rate markets towards more robust foundations. The FCA, Bank of England and Sterling Risk-Free Rate Working Group (RFRWG) published a press statement on 9 February 2022 reflecting on achievements in sterling markets, setting out what more needs to be done, and updated on how the RFRWG will operate in the future.
Update on access to cash
These cover: identifying alternative services, customer communications, customers in vulnerable circumstances, and senior management engagement. We hope these examples offer greater clarity for firms on how they can improve their analysis and demonstrate good practice in all areas of the branch closure process.
Consultation on proposed rules for pension providers to help deliver pensions dashboards
In our consultation paper we are proposing new rules requiring FCA regulated pension providers to connect and supply information about personal and stakeholder pensions to pensions dashboards.
These proposals implement a requirement placed on us by the Pension Schemes Act 2021 and complement the Government’s consultation on the draft Pensions Dashboards Regulations 2022, which includes corresponding requirements for trustees and managers of occupational pension schemes.
Later in 2022 we will also consult on the regulatory framework for providers of qualifying pension dashboard services.
We are seeking feedback on the proposals in this CP by 8 April 2022.
Financial promotions data 2021
Our latest analysis covers the data, from January 2021 to 31 December 2021, resulting from action taken against authorised firms breaching financial promotion rules and referrals, and investigations into unregulated activity.
This is the first time that we have published a full year of data. Last year, we began collecting and sharing quarterly data to show the outcomes of our work in reviewing and intervening in financial promotions that may be in breach of the rules.
We have intervened in 564 financial promotions last year that were in breach of current rules, which is up 172% from 2020.
Sign up to receive updates about our published data.
Access to cash coverage
We’ve published an overview of geographical cash access coverage in the UK at the end of the third quarter (July to September) of 2021. This is the third in a series of regular updates to monitor coverage over time.
Buy Now Pay Later
We have secured changes to potentially unfair and unclear terms in the contracts of Clearpay, Klarna, Laybuy and Openpay. We were concerned there was a potential risk of harm to consumers as a result of the way some of the firm’s terms were drafted.
We used our powers under the Consumer Rights Act 2015 to assess the firms’ terms and conditions. Firms (both regulated and non-regulated) must ensure that their contracts comply with all requirements of consumer protection legislation that apply to their business - we have published guidance for firms on the issues identified through this work.
Credit Information Market Study
Following the July relaunch of the Credit Information Market Study, we have been engaging with industry and consumer groups and completing our analysis, ahead of publishing an interim report. Due to additional work involved, publication is now scheduled for Summer 2022. The study will take account of the Woolard Review recommendations to the FCA.
Digital Sandbox Sustainability Cohort Demo Days
On 17 January, the FCA and the City of London Corporation hosted a Demo Day for the Digital Sandbox Sustainability cohort, an 11-week programme designed to foster innovation within financial services. The 12 teams presented ESG-related solutions to an audience of over 250 people. Solutions included harnessing data analytics to develop an ESG scoring methodology and using real-time satellite data to verify asset disclosures.
We will host another Demo Day in March to showcase the teams’ end solutions.
PRIIPS update
Parliament legislated to extend the UCITS exemption in the PRIIPs Regulation (as enacted in retained EU law) by 5 years, from 31 December 2021 to 31 December 2026.
This extension means that UCITS funds offered to UK retail investors must continue to supply a UCITS key investor information document (KIID).
We intend to make consequential amendments to the UK PRIIPs Regulatory Technical Standards (RTS) and the associated Handbook guidance to reflect the new end date of the UCITS exemption. We issued a statement outlining that we do not propose to take enforcement action against firms for breach of Article 14(1) if they provide disclosure in accordance with Article 14(2) of the PRIIPs RTS.
PRIIPS update
Parliament legislated to extend the UCITS exemption in the PRIIPs Regulation (as enacted in retained EU law) by 5 years, from 31 December 2021 to 31 December 2026.
This extension means that UCITS funds offered to UK retail investors must continue to supply a UCITS key investor information document (KIID).
We intend to make consequential amendments to the UK PRIIPs Regulatory Technical Standards (RTS) and the associated Handbook guidance to reflect the new end date of the UCITS exemption. We issued a statement outlining that we do not propose to take enforcement action against firms for breach of Article 14(1) if they provide disclosure in accordance with Article 14(2) of the PRIIPs RTS.
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