UK Financial Services Regulatory Initiatives Forum publishes seventh edition of Grid | Hogan Lovells

Background

The Financial Services Regulatory Initiatives Forum (Forum) members are the Bank of England (BoE) (including the PRA), the FCA, the Payment Systems Regulator (PSR), the Competition and Markets Authority (CMA), the Financial Reporting Council (FRC), The Pensions Regulator (TPR) and the Information Commissioner’s Office (ICO). HM Treasury (HMT) attends as an observer member. The Forum was launched to strengthen coordination between members, and the Grid (first published in April 2020) sets out the regulatory pipeline so that the financial services industry and other stakeholders can understand – and plan for – the timing of the initiatives that may have a significant operational impact on them.

The Forum usually publishes the Grid twice a year, providing detail on the timing of initiatives over a 24-month horizon. The Grid also highlights key examples of closely interconnected initiatives to help stakeholders easily identify these.

In July 2023, following the Royal Assent of the Financial Services and Markets Act 2023 (FSMA 2023), a short update to the Grid was published setting out the most significant updates and developments since the February 2023 Grid.   For further information on the sixth edition of the Grid see UK Financial Services Regulatory Initiatives Forum published sixth edition of Grid.

Latest edition of the Regulatory Initiatives Grid – November 2023

As noted in the minutes accompanying the Grid, the total number of initiatives since the February 2023 Grid were broadly stable but there are a number of significant measures that have been added following the Royal Assent of the Financial Services and Markets Act 2023 (FSMA 2023) in June 2023.  A positive step taken in the latest Grid is to include more information about initiatives to repeal and replace retained EU Law (REUL) relating to financial services.  A new Smarter Regulatory Framework (SRF) section of the Grid is designed to make it easier to track progress with replacing REUL across a variety of core financial services files.

Significant developments since February 2023

The Grid highlights FSMA 2023 as a landmark piece of legislation which represents an opportunity for regulators in the financial services sector to delivery better outcomes through regulation that better reflects UK markets and wider international standards.  Key developments include:

• Access to cash – the FCA is consulting on proposed rules to ensure cash services are provided on a fair basis.  CP23/29 on access to cash was published by the FCA on 7 December 2023 and remains open for comments until 8 February 2024.

• Financial Promotions Gateway – the FCA has now launched the gateway for authorised firms to apply for approval for financial promotions activities. For further details see Engage article ‘A short guide to the financial promotions gateway’. 

• Strong and Simple prudential framework for non-systemic banks and building societies – the PRA continues to deliver an ambitious programme of reforms including finalising the first phase of Strong and Simple and will be publishing the next Strong and Simple consultation in Q4 2024.  The implementation timetable for Basel 3.1 has been delayed by 6 months to 1 July 2025.

Recognising change – new SRF section

The Grid describes how FSMA 2023 provides a framework to repeal REUL relating to financial services. Through the SRF, REUL will be generally replaced by regulators’ rules or new legislation tailored to the UK.  As mentioned above, the Grid now has a new SRF section (see page 54-60) in response to feedback which brings together all the SRF initiatives across the various financial services sectors into one place.

In relation to the SRF, the Grid sets out that the government and regulators are working together to aim towards a proportionate approach to the repeal and replacement of REUL.  HMT has prioritised REUL into various ‘tranches’ in order to stagger the pace of change and manage the potential impact on industry.  Although the increase in SRF initiatives might represent a short term increase in implementing new rules, the initiatives also aim to provide opportunities to reduce the regulatory burden and tailor rules to the UK to benefit consumers and industry.  For example, the changes being progressed in relation to the Securitisation Regulation will simplify due diligence and transparency obligations along with risk retention requirements to provide a clearer, proportionate framework within which the market can operate.

Key themes that the Regulatory Initiatives Forum will continue to monitor

The Forum will continue to monitor several areas including the following:

• The Consumer Duty has been implemented and a multi-firm review will shortly be published looking at the implementation of the Consumer Duty in retail banking.

• BNPL – work continues on the regulation of Buy Now, Pay Later (BNPL) products.

• Open Banking – the Joint Regulatory Oversight Committee are working towards taking forward their recommendations for Open Banking, including the PSR’s work on Account to Account payments.

Key initiatives in the regulatory landscape

Looking forward, the Grid highlights the following as the key initiatives due to be implemented within the next 2 years:

• The FCA’s final sustainability disclosure requirements and investment product labels (SDR), for further information see here.

• PSR Policy Statement finalising the outstanding Authorised Push Payment (APP) scam prevention policy issues and publishing the first set of performance data.

• Access to cash – as highlighted above the FCA is currently consulting on this in CP23/29 with responses due by 8 February 2024.

• Strong and Simple – The PRA Policy Statement on the capital regime for simpler regime firms is due to be published in Q2 2024.

• Reforms to Solvency II: Policy statement on rule changes needed to implement the matching adjustment following September 2023 consultation is due to be published in Q2 2024.

• The Consumer Duty comes into force for closed products on 31 July 2024.

• The implementation date of the remaining Basel 3.1 standards has been delayed for 6 months until 1 July 2025.

• The connection deadline for pension providers to implement pension dashboard obligations is now 31 October 2025.

Snapshot of some initiatives added to the November 2023 Grid

The following table outlines the next steps for some key initiatives that are new to this latest edition of the Grid:

Next steps

The Forum remains committed to publishing two Grids per year where possible. This edition is the last Grid of 2023 and the next will likely be published in Q2 2024 with the Forum recognising the need to keep stakeholders updated on key developments between editions where possible.

The Forum continues to welcome feedback on the Grid and has launched a dedicated feedback tool on this FCA webpage.  We will be closely monitoring all developments contained within the Grid and please do get in touch if you would like to discuss any of the measures.