The Coronavirus (COVID-19) Pandemic: A Summary of FCA Guidance & Regulatory Developments in the EU’s Investment Services and Capital Markets Sectors
The FCA has issued the following guidance to the financial services industry regarding the response that FCA expects firms to take in response to the Coronavirus (COVID-19) pandemic. The FCA has four primary concerns:
- Protection of consumers;
- Protection of industry employees/staff;
- Protection of markets;
- Resilience of firms.
SM&CR responsibilities
The FCA does not require firms to have a single senior manager responsible for their Coronavirus response. Firms should allocate these responsibilities in the way which best enables them to manage the risks they face. There are existing responsibilities specified in the Senior Managers Regime (SMR), for example, SMF24 for operational resilience and SMF2 for financial resilience.
The FCA emphasises that firms should pay particular attention to its statement on Key Workers in Financial Services of 20 March 2020 and recommends that the SMF1 (or another most relevant member of the senior management team), should be responsible for the firm’s approach to their key workers.
Regulatory change
The FCA is reviewing its work plans so that it can delay or postpone activity which is not critical to protecting consumers and market integrity in the short-term. This will allow firms to focus on supporting their customers during this difficult period.
The FCA has delayed several regulatory initiatives and also scaled back its programme of routine business interactions, so that it will only contact firms on business-critical requests and responses to the current situation.
It will continue with a small number of regulatory changes which support consumers, particularly the most vulnerable, or where major long-term programmes would be disrupted.
Impact on consumers
The FCA rules already provide flexibility to firms in several areas and the FCA expect this flexibility to be used to support consumers, bearing in mind each consumers’ individual circumstances.
The FCA stated it welcomes firms taking initiatives and going beyond usual business practices to support their customers, especially relating to access to cash. When doing so, firms should notify the FCA so that it can consider the impacts and offer support as appropriate.
The FCA still expects firms to deal with complaints promptly. However, where the pandemic prevents this firms should contact the FCA. The FCA has reminded firms that they should aim to resolve any complaint within eight weeks (15 days for payments firms). If they cannot, they should write to the customer explaining why they have not met the deadline.
Insurance Products
On 19 March 2020, the FCA published an update on expectations for general insurance firms during the pandemic. This sets out the expectations on insurers, brokers and others involved in the service supply chain.
Travel Insurance
The FCA supports firms making consumers aware of the scope of their cover and what exemptions there may be. Consumers should also be able to find this information on firms’ websites in a clear, concise way and have access to call centres.
Health Insurance
The FCA also expects firms to make clear any time period restrictions when consumers take out a new policy, for example, if a policy will not pay out from 12 or 18 months of taking out a new policy.
https://www.fca.org.uk/firms/insurance-and-coronavirus-our-expectations
Mortgages
On 20 March 2020, the FCA published new guidance for mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators. Mortgages represent many consumers’ major financial commitment. FCA is encouraging and facilitating the granting of flexibility on mortgage payments as a way of protecting consumers.
https://www.fca.org.uk/firms/mortgages-coronavirus-guidance-firms
Unsecured Debt Products
The FCA has stated its rules give firms the flexibility to act in the best interests of the customer. The FCA welcomes the steps firms have taken to offer support to customers and to encourage them to contact their bank or lender if they are experiencing financial difficulties.
The FCA wants firms to show greater flexibility to customers in persistent credit card debt. The FCA has indicated that the normal procedure for dealing with low repayments of persistent debt should be relaxed and consumers should be given until 1 October 2020 to respond to firm’s communications regarding resolution. This means that firms would not be obliged to suspend the cards of non-responders before then.
Access to Cash
The FCA is working with the Bank of England and the Payment Systems Regulator to understand problems consumers may have accessing cash, and ensure the UK learns the lessons from other countries’ experience of Coronavirus.
UK banks have taken steps to help ensure consumers have access to cash, including the raising of cash machine withdrawal limits and the raising of the limit for contactless card payments.
Firms should continue to help vulnerable consumers access their banking services – online or over the phone. Firms should also remind consumers to be aware of fraud and protect their personal data.
Operational Resilience
The FCA stated it expects all firms to have contingency plans to deal with major events and that the plans have been tested. The Bank of England, Prudential Regulatory Authority and the FCA are actively reviewing the contingency plans of a wide range of firms. This will focus on assessment of operational risks, the ability of firms to continue to operate effectively and the steps firms are taking to ensure continuation of service to customers.
The FCA expects all firms to have read, taken account of and acted upon the issues raised in its Consultation Paper on Operational Resilience (CP19-32) issued in December 2019. The Consultation Paper can be downloaded from the following link:
https://www.fca.org.uk/publication/consultation/cp19-32.pdf
Market Trading and Reporting
The FCA has indicated that firms must consider the broader control environment as they relocate people and functions to new locations/sites or work from home.
Where normally required to do so, firms should continue to record calls, where possible. They should make the FCA aware if they are unable to meet these requirements. Firms are required to consider what steps they could take to mitigate such outstanding risks if they are unable to comply with their obligations to record voice communications.
Firms may experience difficulties in submitting their regulatory data, in which case the FCA expect them to maintain appropriate records during this period and submit the data as soon as possible.
Firms should continue to take all steps to prevent market abuse risks. This could include enhanced monitoring, or retrospective reviews.
The FCA is supportive of the recent ESMA statement regarding upcoming changes to the tick size regime for certain firms, required by the EU Investment Firms Regulation. The FCA will not prioritise supervision of the new requirements at this time. It expects firms to focus on minimising the potential for operational disruption.