The speed read

  • Further action to tackle consumer detriment in DB pension transfers announced
  • Analysing the changing mortgage market
  • How the FCA assesses adequate financial resources
  • Supporting the Shanghai-London Stock Connect scheme
  • [Speech] The future of US and UK regulatory co-operation

Further action to tackle consumer detriment in defined benefit pension transfers announced

The FCA has published its latest data on defined benefit (DB) transfer activity, which highlights the regulator’s concerns that too high a percentage of transfer advice is not up to an acceptable standard. The figures show:

  • 2,426 firms have advised on DB transfers, to 234,951 scheme members
  • 1,454 firms have recommended a pension transfer to 75% or more of their customer base
  • The average value of a pension where transfer advice was provided was £352,303.

When considering DB transfers, the FCA expects advisers to start from the position that a transfer is unlikely to be suitable and is concerned that the high volume of transfers taking place means that firms are not doing this. As a result the regulator has started visiting those firms most active in the market to assess their business models and pension transfer processes. The FCA will also be writing to all firms whose data returns indicate a potential for consumer harm.

 

Analysing the changing mortgage market

The results of the Mortgage Lending and Administration Return (MLAR), which firms complete on a quarterly basis, show some interesting developments in the mortgage market. The key findings for June 2019 include:

  • The total value of residential mortgage lending is 3.4% higher than for the same period a year earlier
  • The market share of mortgage products with a loan to value (LTV) ratio of 90% or higher has increased to 4.5%, indicating their increasing popularity
  • Lending for buy to let properties has decreased marginally
  • The proportion of loan balances in arrears has continued to decline and is now at its lowest level since reporting began in Q1 2007, at 0.99% of all outstanding loans.

 

How the FCA assesses adequate financial resources

In order to provide greater transparency around its process for assessing adequate financial resources, the FCA has published a consultation paper outlining its approach and providing further guidance on its expectations of firms. The regulator expects firms to:

  • Be forward looking and understand how the risks they face evolve through the economic cycle
  • Strike the right balance between delivering financial soundness and avoiding excessive costs
  • Reflect, at least annually, on their risks and financial resources to ensure they are adequately managed
  • Consider the impact of financial depletion and the risk that the firm may be unable to monetise assets in order to cover costs
  • Plan how resources would be maintained while the firm exits the market.

 

[Speech] The future of US and UK regulatory co-operation

Nausicca Delfas, FCA Executive Director of International, recently appeared on a panel to discuss regulatory co-operation and coherence between the UK and US at the BritishAmerican Business Transatlantic Finance Forum. We bring you the key messages from that session. The importance of regulatory co-operation between the UK and US should not be underestimated, not least because they represent the two largest financialcentresin the world and their stability is connected to global economic prosperity.

The similarities in culture and legal tradition have enabled the two countries to form a close working relationship, underpinned by a tradition of supporting open markets and driving stronger international standards. We are currently in a complex period for global policy making. The impact for the UK-US relationship is an ongoing focus on regulatory co-operation as we negotiate Brexit, to ensure continued access to UK markets.

The FCA has just announced details of its new Financial Innovation Partnership with the US regulator, to help identify emerging trends and collaborate on methods to regulate the FinTech sector. It is also designed to develop a programme of commercial trade missions.

 

Supporting the Shanghai-London Stock Connect scheme

The FCA and China Securities Regulatory Commission (CSRC) have announced their support for the proposed new Shanghai-London Stock Connect schemeand published a memorandum of understanding (MoU) on the level of co-operation necessary to support the scheme. The Stock Connect scheme will encourage cross-market investment between the UK and China by enabling Shanghai-listed Chinese companies to apply to be listed on the Shanghai segment of the London Stock Exchange, with UK companies able to apply for listing on the Main Board of the Shanghai Stock Exchange (SSE).