Financial Conduct Authority Announces 2022/23 Business plan
As part of a package setting out the next stage of changes in approach, the FCA published its latest business plan on 7 April. Announced alongside the three-year strategy that sets out how the Regulator will begin to shift focus onto outcomes, the business plan sets out the key activities for the coming year.
In summary, the major focus points for the coming year include:
Ensuring consumer needs are met
2021/22 Business Plan priorities to ‘ensure consumer credit markets work well’ and ‘making payments safe and accessible’ remain in place for the coming year, under the commitment ‘putting consumer needs first’.
The new Consumer Duty is due to be implemented this year. This will set a higher standard of expectation around consumer care and customer service, with firms obliged to abide by a new Principle, a set of cross-cutting rules, and four outcomes. The Duty will become a major element in supervision and enforcement, with the FCA planning to ‘embed the Consumer Duty at each stage of the regulatory lifecycle’. The final rules and guidance are due to be published by the end of July 2022.
Embedded within the design of the Consumer Duty are several key priorities for the FCA, including ‘consumers are sold products and services that are designed to meet their needs and characteristics’ and ‘consumers understand the information they are given and make timely and informed decisions as a result’. The FCA will measure these outcomes through analysis of data, aiming for a reduction in upheld FOS complaints about mis-sold products and services and a reduction in the proportion of consumers that have been offered a product they wanted, but at a price or with terms and conditions that were unreasonable.
The FCA will aim to stay abreast of any changes, through analysis of data, to ensure that their priorities and planned actions are aligned with the realities of the coming months, particularly around the cost-of-living crisis. This could have the potential for a quick turnaround on new guidance for firms.
New requirements around information provided to customers. The Consumer Duty sets out that information provided to customers must be easily understood by its customer base in practice, and that this must be measured. There are new rules in the investment sector around promotions, which aim to allow consumers to identify suitable products that meet their risk needs.
Operational resilience and disruptions
The FCA acknowledges that operational disruptions are inevitable and are aiming to strengthen operational resilience through a more robust authorisation process, the setting of new rules and standards, and enforcement action where firms are not able to meet the standards. Firms that are seeking authorisation and are subject to the Operational Resilience Policy will be required to show how they ensure they meet the expectations of the Policy.
Between 31 March 2022 and 31 March 2025, the Regulator is running an assessment on the ability of firms to remain with their impact tolerances. Firms must be able to show that they are able to meet their tolerance by 31 March 2025.
While the Consumer Duty should drive accountability within firms, the FCA are also looking at action they can take to reduce harm and deal with issues and problem firms. The aim over the coming year is to act more quickly than in previous years, using real time data to step in where they see harms happening. They aim to use their Data Dashboards to more quickly identify emerging issues.
The FCA will continue with their aim to increase the number of cancellations and withdrawals where firms fail to meet the Threshold Conditions. In tandem, they will act to increase awareness of FCA interventions, with the aim that this improves public confidence in the industry.
The Regulator is looking to improve the redress framework with an expectation that there should be an increase in the timeliness of complaint resolution.
The burden of redress costs should shift onto firms, with an associated reduction in the payments through the FSCS to customers of insolvent firms. The FCA will take action to ensure that firms meet their financial resource requirements, and are developing a metric to monitor the accuracy with which they identify firm resilience to financial or other stresses.
The Regulator will make changes to the Approved Representatives Regime to increase the information provided to the FCA and strengthen scrutiny at the Regulatory Gateway.
The 2022/23 business year ushers in significant changes in the regulatory framework, alongside rapidly evolving external factors, that means the FCA are working very differently to only two years ago. Brexit, the impact of the pandemic, and the increasing cost of living are changing how the Regulator needs to react to emerging issues – with the overall aim of keeping the market stable during a time of enormous upheaval and uncertainty.
In practice, this means that the proposals as set out in the Business Plan may develop at relatively short notice and require firms to stay informed and flexible. The plans for 2023/24 may be even more significant – with legislation arising from the Future Regulatory Framework due in 2023, which will likely mean activities outside the core financial services perimeter will be brought under the remit of the FCA.
Keeping staff up to date with the latest good practice in fair treatment of customers is a must in any year – where the Regulator expects monitoring and measurement of good customer service, it becomes vital to business. Customer contact staff are a firm’s frontline in supporting vulnerable customers, and it is essential that they understand how to identify when a customer may be vulnerable.
We offer a dedicated online training course on the Fair Treatment of Vulnerable Customers, updated for 2022.
With the FCA’s focus on the increasing impact to the financial wellbeing of a significant proportion of UK adults, staff must be clear on the identification and support of customers in financial difficulties. Our dedicated Financial Difficulties course takes learners through techniques that have been tried and tested, covers questioning skills, empathy and active listening, what to say, when to say it, and how to support customers.
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