New rules are here to free mortgage prisoners
The regulator has brought in new rules to stop some mortgage customers being denied a more affordable mortgage, which come into effect immediately.
The policy statement follows a consultation in March 2019. Now, customers who meet the criteria can switch to a cheaper mortgage deal. Lenders will be able to use a more proportionate affordability assessment for customers who are up to date with their mortgage payments and want to switch without borrowing more.
The FCA has considered the feedback to the March consultation paper and made changes to the proposals, which include simplifying the definition of a more affordable mortgage and allowing eligible consumers to finance intermediary fees through the new mortgage.
New deadlines for firms’ Brexit plans
As the date for the UK’s exit from the EU has been extended until 31st January 2020, the FCA has confirmed new deadlines for firms’ no-deal preparation.
The regulator confirmed that businesses no longer need to implement Brexit contingency plans by 31st October. Now firms and funds must notify the FCA for entry into the temporary permissions regime (TPR) by 20th January 2020. Fund managers must let the regulator know by 15th January 2020 if they want to make changes to their existing notification.
The biggest issues facing the FCA today
FCA Chief Executive Andrew Bailey gave a speech at the annual Lord Mayor’s City Banquet, exploring the biggest issues currently facing the FCA, and the profound challenge of balancing valuable risk-taking with consumer protection.
Bailey reviewed the development and progress of thinking around economic growth over the last few decades. He went on to explore areas that need focus – the more negative developments the FCA has seen, including:
- An emerging and more obvious distinction between ‘winners’ and ‘losers’.
- Breakdown of trust in institutions and regulators fuelled by the global financial crisis. And related to this, the belief that the system is not fair.
- Growing impatience with the speed and strength of intervention by public authorities. Bailey acknowledged that this was partly justified regarding the FCA, and that the regulator wants to improve its efficiency.
He described that some of the biggest issues the regulator faces are outside the scope of its regulation.
Bailey also described the increased concern related to risk-taking balanced against customers’ protection in non-bank investments. Problems are varied: fraudulent investments, genuine investments mis-sold to certain investors, investments that are misjudged if not mis-sold, and reasonable investments which turn out to be poor value.
The FCA takes different action for these various problems. But Bailey was keen to make clear that the FCA wants to foster an environment in which risk-taking does happen, because innovation and start-ups are essential to encourage investment in the economy, supporting jobs and livelihoods.
To encourage this while protecting customers needs balance, and it particularly requires clear and meaningful explanation of risks to the public. Sometimes this will involve limits and bans imposed by the regulator. Bailey admitted that while these actions may not make the FCA popular, they’re essential to striking the balance.
What’s next for the regulator?
Nausicaa Delfas, Executive Director of International at the FCA, gave a speech at the UK Financial Services Industry Beyond Brexit Summit.
She explained that, while a no-deal exit would be difficult and disruptive for the country, the regulator and financial institutions have prepared thoroughly for this scenario.
Regardless of when and how the UK leaves the EU, Delfas said, the similarities in regulatory rulebooks mean the FCA would continue to work closely with the European Supervisory Authorities, national authorities in member states and all European policymakers.
Internationally the FCA will continue its work supporting and developing global international standards. This includes being an active member of the International Organisation of Securities Commissions (IOSCO), and the FinTech Network, which improves collaboration and understanding between authorities on new technology.
Closer to home, the FCA is investigating the future of regulation in the UK. Delfas explained that Brexit allows the regulator to review its approach.
New feedback statement on effective stewardship released
Following January’s joint discussion paper from the FCA and the Financial Reporting Council, the regulators have released a new feedback statement on what makes effective stewardship.
The FCA said it agreed with the view of respondents to the discussion paper, that no further stewardship-related requirements should be imposed on life insurers and asset managers at this time. It also agreed that firms should first be given the chance to adapt to new rules on shareholder engagement, which took effect in June 2019, and other related measures.
Action the regulator plans to take include:
- Examining how asset owners set and communicate their stewardship objectives. It also wants to take action to promote arrangements between asset owners, asset managers and service providers to support these objectives.
- Helping address regulatory, informational and structural barriers to effective stewardship practices. This includes consulting on rule changes to improve issuers’ climate change disclosures.
- Considering further the role of firms’ culture, governance and leadership in the management of climate risks and the exercise of stewardship.
- Promoting better disclosure of firms’ stewardship practices and outcomes.
Electronic payments standards will stay the same in a no-deal Brexit
The FCA has confirmed its approach to technical standards for strong customer authentication and common and secure open standards of communication in the event of a no-deal Brexit scenario.
The regulator proposed making the UK regulatory technical standards the same as the EU technical standards. The standards are designed to make electronic payments safer and more secure, and the approach will create certainty for firms and maintain protection for consumers if the UK leaves the EU without a deal.