FCA’s Dear CEO letter targets improved prudential processes

For the first time in some years, the Financial Conduct Authority (FCA) has written to asset managers’ CEOs on prudential matters.

The letter includes a plea by the FCA for data that it, and the EBA, can rely upon when aggregating firms’ submissions to understand the macro picture. It also highlights that some firms appear not to understand the reporting that is required of them.

More tellingly, the letter requires that CEOs perform a review of the regulatory reporting practices in their firms to ensure they “comply with the relevant reporting provisions” and “produce materially accurate data.”

We expect that the next steps, following the FCA’s sample testing of firms later this year, will include a requirement that all firms – not just those with demonstrably incorrect or incomplete reports – up their prudential game.

In particular, we envisage that firms will be required:

• to put in place documented policies and procedures around accounting, capital monitoring and forecasting, and regulatory reporting processes that are appropriate and proportionate, robust and designed to produce regular, reliable and timely data; and
• to monitor the operation of these processes to ensure that they are operating as intended.

For more information

We have a range of solutions designed to help you meet your Investment Firm Regulation (IFR) obligations. 

These include: 

• Impact assessment – to help you understand how the new prudential framework impacts your firm. This includes categorisation, capital requirements and resources, liquidity requirement and resources, group rules, regulatory reporting, ICAAP and public disclosure. 
• Regulatory reporting – we can look after your on-going regulatory reporting burden allowing your team to focus on the day-to-day business. 
• ICAAP support services – all firms will be required to annually conduct and document is Internal Capital Adequacy Assessment Process (ICAAP) to assess the level of capital that adequately addresses future and current risks in their business. ACA assists firms in developing and documenting their ICAAP as well as advising how the key underlying processes can be embedded in day-to-day governance. 

Contact us at +44 (0)20 7042 0500 to learn more.