The FCA’s business plan, published today, sets out what the regulator’s key areas of focus will be for the forthcoming year. The seven areas of risk they identified are:
- Technology may outstrip firms’ investment, consumer capabilities and regulatory response.
- Poor culture and control continues to threaten market integrity, including conflicts of interest.
- Large back-books may lead firms to act against their existing customers’ best interests.
- Pensions, retirement income products and distribution methods may deliver poor consumer outcomes.
- Poor culture and practice in consumer credit affordability assessments could result in unaffordable debt. This risk may increasingly affect younger people.
- The range of issues that need to be considered in unfair contract terms is given sharper focus by developments over the last year in legislation and legal precedents
- The importance of firms’ systems and controls in preventing financial crime.
What is interesting, particularly from an ICT perspective, is the mention of poor culture and financial crime prevention.
It’s great to see strong focus in these areas as issues such as FOREX and LIBOR have uncovered some serious shortcomings in the area of culture. As the business plan itself states, “It is vital that firms, in wholesale and retail markets, ensure that cultural changes have been made to prevent poor conduct in future.”
Addressing poor culture has been on the FCA agenda since their inception in 2013, however, the risk around systems and controls in preventing financial crime is a new addition this year. The FCA confirms that, “during 2015/16 we will continue to focus on both anti-money laundering (including terrorist financing and sanctions) and anti-bribery and corruption measures, as these are the areas in which we consider we can deliver the most value.”
The FCA also recognise the concerns, not only in the UK, but in many other jurisdictions too, that banks are using financial crime issues to move away from providing services to certain groups of customers or business sectors. De-risking in this way is already causing massive problems in certain jurisdictions, and the FCA are working with the industry to try to move towards effective management of risk rather than simple risk avoidance.
It’ll be interesting to see what areas of risk regulators in other jurisdictions around the world will be focusing on for the next 12 months.