Included in this weeks edition of InCredit: Clarity in Promotions about Regulated and Unregulated Business: the FCA’s Expectations; Improving switching options for mortgage customers who are currently unable to do so; ESAs publish joint report on regulatory sandboxes and innovation hubs and more...
Clarity in Promotions about Regulated and Unregulated Business: the FCA’s Expectations
The FCA has published a Dear CEO letter to all regulated firms to remind them of their responsibilities relating to the use of financial promotions. The FCA has recently become aware of firms issuing financial promotions which suggest or imply that all of the activities which they undertake are regulated by the FCA and/or the PRA when they are not. The letter reminds firms’ senior managers and boards of what constitutes fair, clear and unambiguous financial promotions.
FCA, 9 January 2019
Improving switching options for mortgage customers who are currently unable to do so
Andrew Bailey, Chief Executive of the FCA, has written to Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, to provide an update on the FCA’s work on 'mortgage prisoners'. The Chair commented that action has been taken by the FCA to help the 10,000 mortgage prisoners who are customers of active mortgage lenders, but there remains 140,000 customers of inactive lenders or firms not authorised to lend. These customers are trapped on a far higher interest rate than is necessary through no fault of their own. The FCA has announced that it will consult on changing its lending rules to allow such customers to switch to an active lender, with whom they may be able to get a better deal. However the Chair stressed that the FCA must act swiftly and not use this consultation to kick the issue into the long grass.
FCA, 9 January 2019
UK Government rejects Committee's calls to regulate SME lending
The Treasury Committee publishes responses to the SME Finance report from the Government and the FCA. The government has also rejected the Committee's calls for the creation of a Financial Services Tribunal. The FCA has stated that the decision on where to draw the boundary between regulated and unregulated activities is a decision for Government and Parliament, not the FCA. It noted that some small businesses are already protected by its rules on lending. FCA believes that the combination of the Senior Managers and Certification Regime (SMCR) and voluntary codes of conduct - could have the same effect on firms’ conduct towards small businesses as the extension of the regulatory perimeter. Additionally the FCA believes that the extension of the Financial Ombudsman Service’s (FOS) jurisdiction will also help create the right incentives for firms to treat their business customers well. However it has noted that if initiatives like the SMCR and the FOS extension do not have the desired effect, then Government and Parliament should reconsider the perimeter.
Treasury Committee, 11 January 2019
UK government joins fight against £14B cost of financial crime
The government has joined forces with the financial services industry on a new task force to battle economic crime. The scale of this type of crime – which includes fraud, bribery, corruption and money laundering – is estimated to be at least £14.4 billion per year. The new Economic Crime Strategic Board, which will meet twice a year, will set priorities, direct resources and scrutinise performance against the economic crime threat, which is set out in the Serious and Organised Crime (SOC) Strategy. The board will be led by Philip Hammond and Sajid Javid and will work with senior figures across the City.
HM Treasury, 14 January 2019
ESAs publish joint report on regulatory sandboxes and innovation hubs
The European Supervisory Authorities (ESAs) published a joint report on innovation facilitators (regulatory sandboxes and innovation hubs). The report sets out a comparative analysis of the innovation facilitators established to date within the EU. The ESAs also set out best practices for the design and operation of innovation facilitators.
EBA, 7 January 2019
EU Parliament committee seeks to boost consumer protection powers of EU financial supervisory authorities
The European Parliament Committee for Economic Affairs (ECON) is pushing for a real upgrade to the powers of the three financial supervisors – the pensions and insurance authority (EIOPA), the banking authority (EBA) and the securities and markets authorities (ESMA). The Parliament committee is keen for the authorities to be able to ban more financial products and activities that can cause real detriment to consumers. The authorities would also be able to coordinate mystery shopping activities with national authorities or to carry out investigations into particular products and institutions. MEPs also want the authorities to develop standards that all national authorities have to follow (minimum powers and tasks) when it comes to supervising the market. Granting the ESAs with these new powers could be a game changer for consumer protection.
ECON, 10 January 2019
EU banking supervisors agree on AML cooperation mechanism
The European Commission has announced agreement on a new cooperation mechanism. The mechanism clarifies the actions that need to be taken when a weak link is discovered in the system and how exactly information will be exchanged, so that cooperation in the fight against money laundering takes place in an efficient and timely way. The new mechanism contains detailed rules on what type of information should be exchanged, under which conditions, and what confidentiality and data protection safeguards will apply to protect citizens’ and companies’ financial data. It forms part of the enhanced cooperation arrangements required by the Fifth Money Laundering Directive (EU) 2018/843 (MLD5).
European Commission, 14 January 2019