FCA Business Plan 2016/2017

Key Priorities and Risks going Forward

PRECISE. PROVEN. PERFORMANCE.

Todays Agenda

A Quick Look Back

The FCA Priorities for 2016/2017

Key Focus Areas for Firms

2015/2016 FCAs Priorities

A strategic markets-led approach to regulation

CEO Departs
Banking Culture Review Scrapped
Implementation of MiFID II delayed to 2018
Asset Management Market Study kicked off November 2015
Protecting Consumers
Auto Enrolment Pensions rolled out over next 2 years
Finalised regulation process of Consumer Credit in March 2016
Individual Accountability
Senior Managers and Certification Regime implemented March 2016
More enforcement against individuals in 2015/2016 than previous years
Greater scrutiny on Whistleblowing measures
International Issues
Preparation for MAR, MiFID II implementation

Our People
FCA continuing drive for cultural and technical diversity
FCA Priorities for 2016/2017 Overview

Wholesale financial markets

Firms culture and governance

Innovation and technology

Treatment of existing customers

Pensions

Financial Crime and Anti-Money Laundering

Advice
Wholesale financial markets:
Desired Outcomes

Risks Outcomes
- Volatility and Uncertainty - Increased confidence in
impacting investor confidence wholesale financial markets

- Financial results take precedent - Enhancement of monitoring

over good conduct and and surveillance
performance
- Increased market efficiency
- Wholesale Banks fail to effect
systems and controls
- Greater responsibility over
conduct
Wholesale financial markets:
Achieving Outcomes

Fair and Effective

Primary Market
MAR/MiIFD II Markets Review
Effectiveness
(FEMR)
Strengthen UK Market Supervising major UK Proposed Prospectus
Abuse Framework FICC benchmarks Regulation

Wider Reporting Enhanced rules on Availability of

Requirements references information

Proactive approach and Assist in SMR Primary debt market

quicker response to implementation effectiveness
Market Change
FICC Market Standards Review Listed market
Board structure
Firms culture and governance:
Desired Outcomes
Risks
- Poor Culture in Firms
- Strategy and Governance not
aligning with values and conduct
- Incentive structures lead to
poor behaviour (Conduct Risk)
- Weak Governance and lack of
accountability create poor
oversight
Outcomes
- Firms Develop Culture of
accountability
- Firms and senior members
aware of good conduct
- All business areas align with
good Firm culture
- Proactive analysis of Firms
issues
Firms culture and governance
Achieving Outcomes

Accountability and Culture

Governance

- Implementation of SMRC - Remuneration and incentive

controls
- Assessment and mitigation
of conduct risk - Enforcement as a potential
deterrent
- Solvency II implications
- Review Governance
- SMRC for FSMA authorised changes
firms
Innovation and technology:
Desired Outcomes

Risks Outcomes
- Technology application limited by - Regulation allows and
system vulnerability encourages innovation

- Complex IT infrastructure - RegTech more efficient

obstructing key services regulation and compliance

- Outsourcing leading to marginal - Combat Cyber threats

oversight of Third party systems
- Robust Recovery and
- Cyber Security and Cyber attacks Continuity Processes
 Innovation and technology:
Achieving Outcomes

Keeping
up to date

Encouraging
Innovation and
new competition
Risk Based Approach to Combat
Cyber Crime
Treatment of existing customers:
Desired Outcomes

Risks Outcomes
- Tough economy leading to - More information and
disadvantaged consumers transparency for Consumers

- Difficulty to obtain Credit - Greater product options

- Lack of product transparency - Remove barriers to switch or

exit

- Unjustified exit and switching - Actively engage and retain

fees customers
Treatment of existing customers:
Achieving Outcomes

Increased Cash Savings Fair Treatment in

Competition in Market Study Life Insurance
Retail banking Sector

CMA retail Switching should Thematic Review

banking Interim be easier for in March 2016 on
Findings Customers of old Fair Treatment
15 provisional accounts Industry wide
remedies Consult on discussion to take
4 additional second package place
remedies in of transparency Collaborative
March 2016 remedies Approach with
Final Report to be Firms
Published
Pensions: Desired Outcomes

Risks Outcomes
- Aging Population - Increased competition
- High cost and uncapped and innovation
fees - Better value for money
- Resorting to alternative - Appropriate Advice
investments - Educating Consumers
- Struggle to contribute to - Protection from scams
pensions
Pensions: How to Achieve Outcomes?

Retirement
Outcomes
Review

Policy Statement
on Oct 2015 Early Exit
changes Charges Cap

Independent
Secondary Market
Governance
in annuities
Committees review

Crack
down on
scams
Key focus areas

Financial Crime and Anti-Money Laundering

Advice
Financial Crime:
Desired Outcomes

Risks Outcomes
- Tweaking risk criteria to - Create hostile sector for
achieve profit and growth money launderers

- Less Investment in systems - Avoid unintended ML

and controls consequences

- Distortion of risk - AML processes do not

assessments exclude people without
reason
- Consumers vulnerable to
fraud - Proportionate AML
Requirements

- Reduce Scams
Key Risk: Proportionality

Important that financial crime regimes are proportionate and

operate efficiently
Minimise any unintended consequences of regulation
Key risk identified
Financial crime requirements, high costs and reduced
profitability may cause firms to change risk weight of their
products and change risk profile of their clients inappropriately.
This may restrict access to financial services to whole groups
of individuals or businesses.
Financial Crime Data Return

Currently the FCAs financial crime supervisory work relies

on the use of ad hoc data requests to gather information
Do not currently gather information from firms about financial
crime regularly
FCA to introduce REP CRIM return from 31 Dec 2016

Content of REP CRIM:

Location of customers
Jurisdiction the firm has business that it considers high risk
Resources allocated to tackling financial crime
Number of suspicious activity reports filed with authorities
Sanctions and Asset freezes
Firms general views on which are the most prevalent types of fraud
4th Money Laundering Directive

Adopted May 2015

To be implemented in all Member States by 26 June 2017
Key drivers and improvements:
Global consistency
Beneficial ownership defined
Reinforced risk-based approach
Suspicious activity reportable in all EU states
Consistent sanctioning of breaches
EU-wide AML and CTF risk assessment
Third-country equivalence regime
Simplified due diligence to be justified
New definition of PEPs
4th Money Laundering Directive Timeline

Q2/Q3 2016
Consultation
Paper issued by
HM Treasury
detailing the
proposed Q1 2017
amendments to Guidance
current legislation finalised

Q3/Q4 Draft June 2017

regulations Regulation comes
into effect
Advice:
Desired Outcomes
Planned Activities Professionalism and
Suitability of Advice
Financial Advice Market Review

Launched in August 2015

Explores the supply and demand sides of the market for
financial advice, barriers to consumers and potential
remedies
Findings concerns that market for financial advice was not
working well for all consumers even under RDR
Aim develop a market that delivers affordable and
accessible financial advice and guidance for everyone
Financial Advice Market Review: Key Areas

Affordability
advice more cost effective for the mass market
automated advice models
technological development
Accessibility
clear definition of regulated advice (personal recommendation)
tackle barriers preventing consumers from seeking advice
employers to provide advice on financial planning
Redress
increase consumers confidence in regulatory system
confirm liability of firms when giving wrong advice
increased transparency of how FOS reviews complaints
recommendations to FSCS
FAMR FCA Recommendations
Questions?
Helping to keep you up-to-date

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