FCA Guidance on Coronavirus for Affected Firms
The effects of the spread of coronavirus are being felt across the board in the UK, and the Financial Services sector is facing a raft of challenges as it adjusts to dealing with its impacts. The Financial Conduct Authority have confirmed a number of steps that they are taking to ensure the continued functioning of the sector, including ceasing all ‘non-critical’ work and publishing guidance for affected firms. They have set up dedicated teams to administer their response and are continually updating their advice and guidance on the coronavirus situation.
This is the moment at which continuity plans come into their own. While the FCA are looking to start and continue ongoing contact with firms during the crisis, firms should begin proactively taking reasonable steps to offer strong support to customers, including small businesses, to help them through. As the situation is rapidly changing, this support will require continual attention and management. We have seen a number of high profile steps taken within the past month by some firms, including mortgage holidays offered by some banks, advisers working over skype, allowing call centre staff to work from home – necessitating new controls over call recording and data handling – and publishing clear and easy to understand FAQs online about how any changes might affect customers. The FCA will expect to see firms give thought to the potential impact on consumers and should use flexibility within the regulatory regime to support consumers and think about their individual circumstances. Whilst the Regulator welcomes firms taking initiatives to go beyond usual business practices to support their customers, firms should notify the FCA when they do this so they can consider the impacts and offer support as appropriate.
Financial Resilience and Liquidity
There is an expectation that firms continually manage financial resilience and liquidity, and the FCA have confirmed that as capital and liquidity buffers are designed to be used in times of stress, firms are able to use them now to provide for the continuation of business. Firms should, however, also be planning ahead. If it is likely that the firm will get into difficulty, or is concerned it may fail to meet debts, it should contact the FCA as soon as possible.
Systems and Controls
The FCA is actively reviewing the contingency plans of a wide range of firms – including assessing the ability of firms to continue to operate effectively. Firms must still ensure that they meet their regulatory obligations despite any changes to usual ways of working, and maintain appropriate systems and controls to ensure continued compliance.
Senior Managers and Certification Regime
Given some confusion about the part to be played by the Senior Managers and Certification Regime, the FCA have also confirmed they don’t require firms to have a single senior manager responsible for their coronavirus response – firms should allocate these responsibilities in the way which best enables management of risks – bearing in mind that there are existing responsibilities in the SMF24 and SMF2 functions, for operational resilience for financial resilience respectively.
Consultation Papers and Regulatory Changes
The FCA is also reviewing its work plan so that it can delay activity which is not critical to protecting consumers and market integrity in the short-term, to allow firms to focus on supporting customers. This includes extending the closing date for responses to open consultation papers and calls for input until 1 October 2020 and rescheduling other planned work. Delayed consultation paper closure dates include Quarterly Consultation no 27 (CP20/4), Building Operational resilience: Impact tolerances for important business services (CP19/32), Introducing a single easy access rate for cash savings (CP20/1). Other delayed work includes the Motor Finance Policy Statement, Consultation Paper on mortgage switching, vulnerability guidance and vulnerability research, and the Consumer Credit Act (CCA) review. The FCA will, however, continue with a small number of regulatory changes which support consumers.
And the FCA have also issued a reminder that, despite the current situation, complaints should still be dealt with promptly. In the event that the pandemic prevents this, firms should contact the FCA directly, who have confirmed they understand the pressures that firms will be under.
As the situation changes from week to week, the FCA will update their guidance, and are closely monitoring the situation. The regulator has also published guidance on scams – which have seen an uptick within the past month – targeted at individuals’ and businesses’ concerns, including loan fee frauds, good cause scams, and advice to invest or transfer existing investments into non-standard investments, as well as the existence of clone firms.