The Regulatory Initiatives Grid and Implementing Regulatory Change in the UK

The Financial Services Regulatory Initiatives Forum (FSRIF or the Forum) recently published its Regulatory Initiatives Grid (‘the Grid’) to help the financial services industry understand, and plan for, regulatory change. The timing has been brought forward to help ease the operational challenges faced by firms during the current COVID-19 crisis.

The Forum is made up of representatives of the Bank of England, Financial Conduct Authority, Prudential Regulation Authority, Payment Systems Regulator, Competition and Markets Authority, and with oversight from HM Treasury. The Grid aims to present the Forum’s co-ordinated approach for regulatory initiatives and its revised pipeline for financial services regulation on a rolling quarterly basis looking twelve months ahead.

Read on for a summary of the areas of focus including some subtle changes to regulatory priorities identified within the FCA’s Business Plan for 2020/2021, published last month.

The Grid: what is it and what does it entail?

The first of its kind, the Grid has been published on a “pilot” basis, with the FSRIF intending to update the document on a semi-annual basis. The grid details the Forum’s regulatory approach applied to three stages: the near-term (now through to the summer) the medium term (following the summer to March 2021) and the longer-term (from April 2021 onwards).

Alongside the provision of revised timetables, the Grid contains a key identifying whether the implementation of new regulations will drive a low, medium, or high operational impact to financial services firms. The Grid is intended to be a live document with the FSRIF continuing to monitor the current situation. They make it clear that the timelines for the major initiatives are not confirmed and may be subject to delay.

Does the Grid reveal any new initiatives or timetable delays?

The Grid contains no major new initiatives with the focus remaining on areas deemed to be the source of the greatest potential harm to consumers and the wholesale financial markets. In the forward to the Grid, co-Chairs Christopher Woolard, Interim CEO at the FCA and Sam Woods, Deputy Governor of the PRA, emphasis two areas of focus in particular - the transition from LIBOR and the UK’s withdrawal from the European Union.

Key initiatives on the latter are at present unaffected, notably the onshoring of EU legislation and regulator rules before the end of the transitional period on 31 December 2020, as well as the supervision of the UK branches of international firms, and a new market access regime for Gibraltar. The regulator will continue to work HM Treasury to implement requirements of the 5th Money Laundering Directive. Further non-divergence from EU policy may be identified in the new Prudential Regime for MiFID firms which will be confirmed in an upcoming Financial Services Bill and is due to come into force on 21 June 2021.

Other key initiatives identified in the FCA’s business plan have been pushed back to Q4 2020 – consultations on climate-related disclosures for issuers, operational resilience in the financial services sector, risk management of third-party outsourcing, plus policy work on the use and value of data in wholesale financial markets.

The only near-term initiative identified is the move from the current online reporting system, GABRIEL, to a new data collection platform. Users of GABRIEL will be aware that they are required to make a one-time registration to gain access to the platform using existing Connect login details.

Have the FCA’s priorities changed in the near-term?

Astute FCA-watchers may notice some delicate shifts of focus in the Grid compared with the Business Plan.

One notable absentee is the onshoring of the Regulation of sustainability-related disclosures in the financial sector (“the Disclosures Regulation”), due to come into force on 10 March 2021. This conflicts with the UK government’s previously declared intentions but may reflect a change in political priorities since December’s General Election. However, the FCA is proceeding with its work on climate change focusing on ‘green’ disclosure requirements for issuers.

The Grid contains no further detail on the implementation of effective governance under the Senior Managers and Certification Regime (‘SM&CR’). It is not clear whether the FCA’s efforts on this area have shifted to a slightly longer-term focus.

How does the Grid affect firms’ implementation of regulatory change?

The delay to several consultation periods, as highlighted above, could lead to the publication of a significant volume of finalised policy towards the fourth quarter of 2020. Firms may need to re-organise their planning to ensure that they have the resources to cope with a potentially large amount of operational change during 2021.

Looking beyond the next 12 months, clients should notice that higher impact initiatives identified on the Grid will mean fairer lead-times to prepare for regulatory requirements, particularly those that carry burdensome operational changes. ACA will continue to advise clients of the key regulatory messages emerging from its bi-annual publication.

For further information

If you have questions about what this alert means for you, please speak to Marianne Cooney, Martin Lovick or contact your usual ACA consultant on +44 (0)20 7042 0500.

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