The summary includes consultation/policy papers and speeches published by the regulators and other bodies, as well as articles that may be of interest. It is not intended to be an exhaustive list of all matters relevant to financial services.

Please refer to the relevant organisations’ website for a complete record of their publications and news releases.

On 28 September the Treasury published a consultation on draft secondary legislation reforming the ‘Ring-fencing’ requirements. The legislation broadly implements the proposals of the Skeoch Review that reported in March 2022. The proposals include measures to i) reduce the number of banks caught by the regime (eg by raising the threshold to £35billion of core deposits); and ii) broadening the activities and services that ring-fenced banks can provide (eg allowing ring-fenced banks to establish operations outside of the EU, or allowing them to take minority equity stakes in UK SMEs). The consultation closes 26 November.

Alongside the consultation the Treasury also published a response to its call for evidence on aligning the ring fencing and resolution regimes. The Treasury’s response notes that the “Call for Evidence provided limited evidence and a broad, mixed, range of views on: a) the ongoing benefits that ring-fencing provides to financial stability not found elsewhere in the regulatory framework; and b) the options for aligning the ring fencing and resolution regimes”. The Treasury will continue to work with the Bank and PRA to consider the options and plans to publish its policy proposals in the first half of 2024.

On 26 September the Treasury published the Mortgage Charter, a set of standards agreed earlier this year (see June Regulatory update) between the UK’s largest lenders, the FCA and the chancellor, and that will determine how lenders treat their regulated residential mortgage customers that are experiencing difficulties. Standards include a commitment not to force an individual to leave their home within a year of a missed payment, except in exceptional circumstances.

On 19 September the PRA hosted a Conference on the role of financial regulation in international competitiveness and economic growth, as it explores ways to better implement its new secondary objective under FSMA 2023. The PRA also published two working papers as background material to the conference discussions: How to measure the contribution of prudential regulation to competitiveness and growth; and The links between prudential regulation, competitiveness and growth.

On 27 September the PRA announced it was delaying the implementation date of the final Basel 3.1 policies by six months to 1 July 2025, and that it would split the final policy statement in two (with near-final policies on market risk, credit valuation adjustment risk, counterparty credit risk and operational risk published Q4 2023, with the remaining policies published Q4 2024).

On 28 September the PRA published a consultation proposing reforms to the Matching Adjustment. The proposals implement the Government’s Solvency II reforms (part of its Edinburgh Reforms), and are designed to improve insurers’ flexibility to apply the matching adjustment, which it is hoped will allow insurers to make more long-term investments in the UK Economy. The PRA also proposes some streamlining of its processes to enhance proportionality, and additional measures to ensure risks are effectively managed (eg senior management attestation that they understand and are appropriately managing their risks associated with the matching adjustment). The consultation closes 5 January 2024.

On 29 September the PRA provided thematic feedback on the 2022/23 round of Written Auditor Reporting. The feedback covered IFRS 9 Expected Credit Losses (ECL) and accounting for climate related financial risks. The PRA noted that firms had made progress implementing its ‘high quality ECL practices’, but that there was variation in practice and further work is required to embed high quality practices. The main ECL findings include that: model risk remains elevated and it is crucial that post model adjustments are effectively challenged; with limited default experience in recent years it is important to challenge recovery assumptions; and that firms should consider additional, more severe but plausible economic scenarios. The main climate findings include: that the tools to quantify the impact of climate risks on ECL should become more quantitative, robust and data driven; that there is scope for firms to consider a wider range of climate risk drivers relevant to their portfolios; that the availability and quality of data remain pervasive challenges; and that firms are encouraged to establish clear plans and timeframes for developing climate accounting capabilities.

The PRA also released its findings and from its evaluation of the Written Auditor reporting policy. The PRA found that Written Auditor Reporting policy had met its objective of improving the quality, focus and discipline of the auditor-supervisor dialogue. No major changes are proposed (eg expanding the scope to bring in other firms), although the PRA will look to improve the guidance for auditors and will monitor whether the number of questions is appropriate.

On 1 September the FCA announced that Direct Line Group will carry out a past business review to identify all instances where a customer has been overcharged and provide appropriate redress. DLG has charged some existing home and motor customers more for their renewal than they would have done if they were a new customer. Customers do not need to do anything themselves at this stage as Direct Line Group will contact affected customers directly. This is the first time a formal voluntary requirement has been agreed with a firm in relation to the FCA's motor and home insurance pricing rules. 

On 5 September the FCA set out the issues it will consider as part of its review of the treatment of Politically Exposed Persons (PEPs) by financial services firms. The review will include consideration of how firms are applying the legislation, are applying proportionate risk assessments and ongoing monitoring, applying enhanced due diligence, and deciding to reject or close accounts. The FCA will report by end June 2024.

On 7 September the FCA announced it may give firms more time to implement certain changes necessary to meet new rules on marketing cryptoassets. The new rules came into force on 8 October, but the FCA indicated firms may apply for flexibility to delay until 8 January the implementation of features that require greater technical development.

On 14 September the FCA published the results of its review of later-life mortgages. In many cases advice did not meet the FCA expected standards, finding inaccurate or misleading promotions, benefits being highlighted but not risks, and firms using their FCA regulated status as a means of promotion. The FCA required those firms falling short to improve the quality of their advice.

On 19 September the FCA published its initial findings from its review of bank account access and closures. The information collected by the FCA suggests that no firm closed an account between July 2022 and June 2023 primarily because of a customer’s political views. The typical reason for an account closure was that it was inactive. The FCA plans further work to verify the data and understand the reasons for the decisions taken.

On 20 September the FCA released its second publication of General insurance value measures data (for the period January to December 2022). The FCA has concerns that firms have not implemented its Product and Consumer Duty Rules, that certain firms do not provide fair value to customers, and that some firms have deficient product governance. Of particular concern are some Guaranteed Asset Protection products where only 6% of premiums are paid out in compensation, while 70% may have been paid out in commission. The FCA has written to insurers warning that more action must be taken to ensure good consumer outcomes.

On 25 September the FCA and PRA published consultations to boost diversity and inclusion in UK firms. The Regulators’ aim is to improve diversity and inclusion as they consider that it supports prudent decision-making and better risk management. Proposals include the requirement to have a firm wide strategy, that the largest firms set diversity targets, and that firms have a strategy to promote diversity and inclusion on the Board. The FCA is consulting on proposals to introduce a new regulatory framework on Diversity and Inclusion. The consultations close 18 December 2023.

The UKEB has published two reports arising from its Climate-related Matters Research Project: 

• The ‘Climate-Related Matters: Summary of Connectivity Research’ provides an overview of recent third-party research into connectivity challenges between TCFD disclosures (a proxy for the disclosures required by IFRS S2) and the financial statements. 
• ‘A Study in Connectivity: Analysis of 2022 UK Company Annual Reports’ which provides a deep-dive analysis from an investor’s perspective of potential connectivity challenges and includes stakeholder feedback on possible causes. 

Both reports can be accessed on the UKEB Connectivity webpage , which includes links to the UKEB’s work on connectivity between sustainability related financial disclosures and financial reporting accounting standards.