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Business Plan

2018/19
Business Plan
Contents

Chair’s foreword 5
Chief Executive’s introduction 6
Our priority work for the year ahead 8
1 Our role 10
2 EU Withdrawal 16
3 Our priorities for 2018/19 19
4 Cross-sector priorities 20
Firms’ culture and governance 20
Financial crime (fraud & scams) and anti-money laundering (AML) 22
Data security, resilience and outsourcing 24
Innovation, big data, technology and competition 26
Treatment of existing customers 28
Long-term savings and pensions and intergenerational differences 30
High-cost credit 32
5 Sector priorities 34
Wholesale financial markets 34
Investment management 38
Retail lending 41
Pensions and retirement income 44
Retail investments 46
Retail banking 48
General insurance and protection 50
6 How we operate 53

Annex 1: Update on market-based activity 58


Annex 2: FCA organisational chart 60
4
Financial Conduct Authority
Business Plan 2018/19 Chair’s foreword

Chair’s foreword
Charles Randell

It is a great privilege to introduce the I know we will also be looking hard


FCA’s Business Plan at the beginning of at how we can be an even more
my time as chair. The plan sets out the accountable and transparent
range of work we undertake and how regulator, as we continue to explain
it aligns to our objectives. The work to all our stakeholders why and how
we do affects every household and we make our decisions.
business in the UK.
I very much look forward to working
The plan was approved by the FCA with the FCA’s staff and its Board in
board under John Griffith-Jones the year ahead.
as chair. He has chaired the FCA
for the last five years and I would
like to thank him in particular for
the commitment to public service
and resilience he has brought to his
leadership of the organisation. Charles Randell
Chair
This year is a challenging one for the Financial Conduct Authority
regulator. To achieve our priorities,
as well as plan for EU Withdrawal,
while continuing to deliver our core
regulatory activities effectively,
will require us to use our resources
efficiently and flexibly.

The work we do affects


every household and
business in the UK

5
Financial Conduct Authority
Chief Executive’s introduction Business Plan 2018/19

Chief Executive’s introduction


Andrew Bailey

The FCA regulates the UK’s financial location, we move our London
services sector to ensure that office to the International Quarter in
markets work well for individuals, Stratford. This will finally allow us to
businesses and the UK economy as a bring all our London staff together
whole. This Business Plan explains our in one building. The improved
priorities over the next year. technological infrastructure will
allow us to work more effectively and
We publish this Business Plan collaboratively, meeting our public
alongside our Sector Views. Sector interest objectives.
Views provide an assessment of the
developments, performance and Our Mission also stresses the need for
risks of each financial services sector us to be able to measure the impact of
in the previous year. They give us a our work more meaningfully, and we
detailed picture of financial sectors, will continue developing better ways
consumers and relevant macro- to do this over the next 12 months.
economic and demographic factors,
which directly informs our activity. Planning our priorities for the
next year has again underlined
The priorities in this year’s Business how technology is supporting
Plan reflect the high level of resource competition, transforming markets
we need to dedicate to EU Withdrawal, and changing the way consumers
given its impact both on our regulation engage with them. The take-up of
and on the firms we regulate. This technology and innovation across
inevitably affects the amount of work and between firms is accelerating,
we can undertake in other areas. As a creating a conveyer belt of risks and
result, agreeing our 2018/19 priorities opportunities. These are often finely
has involved particularly rigorous nuanced, so this year we have agreed
scrutiny and challenge. two clearly defined priority themes
to address different aspects of
As we explained in Our Mission, our technological regulation, application
aim is to use our tools efficiently and resilience. This Business Plan
and cost-effectively to deliver explains why tackling risks including
the greatest public value. So we cyber and financial crime, as well as
have prioritised areas where we staying ahead of developments in Big
consider both that the risks of harm Data and Open Banking, remains a
to consumers, market integrity or priority.
competition are greatest and where
we assess our intervention will have FCA Innovate and our regulatory
the most impact. sandbox are increasingly being
adopted as templates by many
The aim of adding public value cuts overseas regulators, shaping
across all our activities. This year, international standards in innovation.
as the lease expires on our current Against this backdrop, the UK’s

6
Financial Conduct Authority
Business Plan 2018/19 Chief Executive’s introduction

This year’s Business Plan


priorities reflect the
high level of resource
we need to dedicate to
EU Withdrawal

withdrawal from the EU makes it even Culture and governance is particularly to build a national picture to assess
more important that UK markets relevant when firms design new potential and actual harm and identify
remain visibly clean, fair and reliable. products and services. They also the most effective ways to reduce it.
It is also important that we both heavily influence whether firms’ Over 2018/19 we will deliver a wider
maintain and extend our levels of business models deliver the right package of remedies as part of our
international co-operation. outcomes for consumers. The Retirement Outcomes Review.
shift to consumers having to
The requirements of the Markets in take more responsibility for their These are just some of our priorities
Financial Instruments Directive financial choices has coincided with over the next 12 months. Delivering
(MiFID II) illustrate the major changes to increasingly complex needs. our core work of authorisation,
improve market integrity in wholesale supervision, enforcement and
markets in recent years. From tackling Perhaps nowhere is this more clearly developing and implementing policy
conflicts of interest to strengthening illustrated than in the retirement and rules will always demand most of
the transaction reporting and Initial income savings and pension market. our resources.
Public Offering (IPO) regimes, we This presents a significant public
will closely monitor how well firms challenge, both in terms of the need for In this particularly challenging year,
are complying with these new new and affordable savings products I am delighted to welcome Charles
requirements. To clarify how we take and in the information firms give Randell as the FCA’s new Chair. I
decisions about intervening in markets, consumers to help them take decisions. would also like to thank our outgoing
this year we will also publish a document Chair, John Griffith-Jones and
which explains our approach to market In the past year, we have been pass on my and the FCA’s warmest
integrity. This joins documents already extremely concerned about some wishes for his future. Finally, I would
published as part of Our Mission, which firms exploiting consumers’ lack like to thank all of our staff. I am
explain our approach to consumers, of knowledge of pension products consistently impressed with their
competition, authorisation, supervision when advising them to transfer out sheer hard work and commitment
and enforcement. of defined benefit schemes. We to delivering the greatest possible
have recently published new rules public value to firms, consumers and
Firms’ culture and governance is on pension transfer advice. These the UK economy.
pivotal to building public trust and rules aim to improve the quality
confidence in the UK’s financial of pension transfer advice to help
services industry, both domestically consumers make informed decisions
and internationally. We continue for their individual circumstances.
to implement the reforms that We also published a Consultation
followed the financial crisis. The Paper (CP) proposing further changes Andrew Bailey
extension of the Senior Managers which include requiring pension Chief Executive
and Certification Regime (SM&CR) transfer specialists to have the Financial Conduct Authority
to insurers this year will ensure that same qualifications as investment
key staff are accountable for their advisers. This CP also seeks views
conduct and decisions. We will publish on whether we should intervene
our policy and final rules that set out in charging structures for pension
how the SM&CR will be extended to all transfer advice. In 2018 we will be
other FSMA firms in summer 2018. collecting details of practices across
the entire pensions transfer market

7
Our priority work for the year ahead
EU Withdrawal: Cross-sector priorities:

Current priorities Firms’ culture and Financial crime (fraud Data security, resilience
governance & scams) & anti-money and outsourcing
laundering (AML)
Working with the Finalising rules to extend Tackling money laundering Supervisory assessment of
Government the Senior Managers and firms’ operational resilience
Publishing our findings on
Certification Regime to all
money laundering in the Assessing the risks of
Ensuring an appropriate FSMA firms
e-money sector outsourcing and third-party
transition for EEA firms
Establishing a public register providers
Embedding the new Office
Working with regulated firms Focusing on firms’ for Professional Body Monitoring the roll out of
and monitoring the risks to remuneration arrangements Anti-Money Laundering technology and resilience
our objectives Supervision (OPBAS) data as part of Open Banking
and the second Payment
Taking account of the
Working towards our Services Directive
recommendations of
operational readiness
the Financial Action Task
Force’s evaluation
Cooperating with our
international partners Raising awareness of fraud
and scams
Improving intelligence
sharing with law
enforcement partners and
agencies to fight money
laundering and financial
crime

Cross-sector priorities:

Innovation, big data, Treatment of existing Long-term savings, High-cost


technology and competition customers pensions and credit
intergenerational
differences
Assisting firms through the Understanding firms’ Delivering a package of Considering alternatives to
FCA Innovate programme pricing practices in retail remedies as part of the high-cost credit
general insurance Retirement Outcomes
Allowing firms to test viability Finalising our review of
Review
in the regulatory sandbox Communicating with claims high-cost credit products
management companies Collecting and acting including:
Testing and applying RegTech
in advance of regulation in on data from firms that
and advanced analytics to • rent-to-own
2019 have pension transfer
regulation
permissions to assess • home-collected credit
Assessing claims inflation in
Reviewing retail banking practices across the market
general insurance • catalogue credit
business models
Understanding the levels of
Helping consumers make • arranged and unarranged
Reviewing firms’ use consumer undersaving for
informed decisions on their overdrafts, including the
of data and publishing retirement
insurance needs monthly maximum
a Memorandum of
Publishing a feedback charge (MMC)
Understanding with the Improving competition in
statement on competition
Information Commissioner’s current accounts
in non-workplace pensions
Office
Publishing final rules to
Publishing new crowdfunding allow more Small and
rules Medium-Sized Enterprises
access to the Financial
Review of cryptocurrencies as
Ombudsman Service
part of the Treasury, Bank of
England and FCA Taskforce Improving competition in
the cash savings market

8
Sector priorities:

Wholesale financial Investment Retail Pensions and


markets management lending retirement income

Clarifying our approach to Finalising rule changes Assessing creditworthiness Developing a joint pensions
market integrity following the Asset in consumer credit strategy with The Pensions
Management Market Study Regulator
Reviewing money laundering Launching our Market
in capital markets Working with European Study on Credit Information Potentially extending
Supervisory Authorities the remit of Independent
Monitoring firms’ compliance Publishing our interim
in the implementation and Governance Committees
with new conflicts of interest report on our Mortgage
review of the Packaged for workplace pension
requirements Market Study
Retail and Insurance-Based schemes
Addressing operational Investments Products Reviewing the commission
Helping consumers
resilience Regulation (PRIIPS) between credit brokers and
avoid scams
other firms
Monitoring firms’ compliance Consulting on new rules
with our rules on IPOs and guidance on liquidity Ensuring the debt
management management sector works
Publishing final rules and our
well for consumers
approach to industry codes Considering the extension
of conduct for unregulated of governance remedies to Reviewing the motor
markets with-profits and unit-linked finance market
funds
Reviewing retained
Assisting the Treasury Consumer Credit Act
in the development of a provisions
new prudential regime
for investment firms
authorised under MiFID II
Publishing research that
explores the rise of passive
investment

Sector priorities:

Retail Retail General insurance


investments banking and protection

Assessing the impact of Continuing to help firms Implementing the Insurance


the Financial Advice Market prepare for ring fencing Distribution Directive
Review (FAMR) and the Retail
Developing a payments Publishing our interim report
Distribution Review (RDR)
sector strategy from the Wholesale Insurance
Reviewing High-risk and Brokers Market Study
Delivering the revised
complex investments
Payment Services Directive Concluding our initial
Evaluating our interventions (PSD2) diagnostic work on general
on Contracts for Difference insurance distribution chains
Continuing our awareness
Publishing our report on the campaign on the Payment Publishing the findings from
Investment Platforms Market Protection Insurance our Call for Input on access to
Study redress deadline travel insurance
Raising awareness of fraud Evaluating the effectiveness
and scams of our 2015 rules on
Guaranteed Asset Protection
insurance

9
Chapter 1 Financial Conduct Authority
Our role Business Plan 2018/19

Our role

Our objectives, set by Parliament, ensure that we We are the conduct regulator for
over 58,000 financial services firms
act in the public interest. Our aim is to add public in the UK and 145,000 approved
value by improving how financial markets operate, to persons.
benefit individuals, businesses and the UK economy.
We are also the prudential supervisor
We have a single strategic objective under the Financial for approximately 46,000 firms.
Services and Markets Act 2000 (FSMA) – to ensure the For 18,000 of these firms, we have
markets we regulate function well. We also have three detailed standards that need to be
met. Even those firms that have
operational objectives under FSMA to advance this. no minimum financial resource
requirements must still ensure
they have adequate resources, as
outlined in the threshold conditions.

Operational objectives

Protect consumers:
to secure an appropriate
degree of protection for
consumers

Protect the integrity


of financial markets:
to protect and enhance
the integrity of the UK
financial system

Promote competition:
to promote effective
competition in the interest
of consumers.

10
Financial Conduct Authority Chapter 1
Business Plan 2018/19 Our role

We concentrate our resources Figure 1


on the markets and firms most
likely to create consumer harm, Our decision-making framework
damage market integrity or weaken
competition. Our Mission 1 provides
the framework (see Fig 1) for the
1.
strategic decisions we take, the
Identification of
reasoning behind our work and the
harm
way we choose how we intervene.
We aim to use our tools efficiently to
identify and mitigate harm.

We are committed to achieving 4. Our remit 2.


value for money in addressing harms Evaluation Our impact Diagnostic
and delivering our objectives. We tools
adhere to the National Audit Office
User needs
definition of value for money as
the optimal use of resources to
achieve an intended outcome. We
3.
are focused on minimising our costs
Remedy tools
while achieving our objectives,
through continuous improvement
and a range of activities to increase
efficiency.

We analyse issues across financial


sectors, and within specific sectors, Table 1
that affect consumers’ changing
Relevant FCA
circumstances and needs. Every
operational
year, we publish a summary of
Type of harm objective(s)
our Sector Views, along with our
Business Plan. Together, they set Confidence and participation in markets threatened by Market integrity
out the issues and harms we have unacceptable conduct such as market abuse, unreliable Consumer protection
identified, and drive our activities for performance or by disorderly failure Effective competition
the coming year.
Buying unsuitable or mis-sold products; customer Consumer protection
The Mission outlines five categories service/treatment Effective competition
of harm, which relate to our Important consumer needs are not met because of gaps Consumer protection
operational objectives. We deliver in the existing range of products, consumer exclusion, Effective competition
on our operational objectives by lack of market resilience
reducing or preventing this harm in
cost effective ways, thus serving the Prices too high, or quality too low, compared to Effective competition
public interest (see Table 1). efficient costs

Risk of significant harmful side-effects on wider markets, Market integrity


Since we published Our Mission
the UK economy and wider society, e.g. crime/terrorism
2017, we have published five further
documents which give more detail
about our approach towards
consumers and in our authorisation,
competition, supervision and
enforcement functions. 2 In 2018/19,
we will publish our approach to
market integrity.

1 www.fca.org.uk/publication/corporate/our-mission-2017.pdf
2 www.fca.org.uk/publications/corporate-documents/our-approach
11
Chapter 1 Financial Conduct Authority
Our role Business Plan 2018/19

Consumers: Our Future Approach as we formulate ways of working.


to Consumers paper, published We intend to publish a Feedback
in November 2017, built on the Statement and final version of Our
Mission and developed our position Approach to Consumers in summer
Our approach is based on on complex consumer issues such 2018.
what we know about how as exclusion and vulnerability. It
explored when and how we should Authorisation: We use authorisation
consumers actually behave intervene in areas that fall into the primarily to prevent harm from
social policy field. It also set out how occurring. Authorisation ensures
we use and prioritise the different that all regulated firms and
tools we have to prevent harm to all individuals meet minimum standards
retail consumers. from the start, and keeps those
that do not out of the market. When
Overall, our approach is based we assess these standards, we
wherever possible on what we know take a proportionate look at many
about how consumers actually factors, such as a firm’s business
behave. We use data to identify model, key personnel and overall
consumer harm and act where resources. Individuals that hold
appropriate. We enforce our rules, specific important functions in
such as our financial promotions and firms are required to be approved
consumer contract rules, to prevent by us. Additionally, following the
harm to consumers. And we prevent introduction of the Senior Managers
potential harm to consumers and Certification Regime (SM&CR)
from firms designing or marketing for deposit takers, we also require
products that are unfair, unclear or senior managers to have a clear
misleading, or from sales models statement of the activities they
which encourage bad rather than are responsible for. We want to
good consumer decisions. We also remove unnecessary barriers for
look at cases where markets do not new firms that can hinder effective
give access to particular services or competition, while still ensuring all
consumer groups. firms maintain minimum standards
to prevent harm to our consumer
There have also been calls for the protection and market integrity
FCA to introduce a new duty of objectives.
care provision for firms. We initially
intended to deliver this work as part We assess and approve changes
of our Handbook Review following that firms want to make to key areas
the UK’s exit from the EU in 2019. such as appointing individuals into
This was because it would be difficult key roles, changing their business
to make extensive changes to the models or the services they
FCA Handbook at the same time offer, mergers and acquisitions.
as undertaking the major overhaul We will intervene where we think
needed to put the EU Withdrawal these changes do not meet our
legislation into effect. However, requirements. We run a range
we recognise the wider debate and of initiatives to help firms and
feedback from our stakeholders, individuals understand and meet our
and the likelihood now that an EU authorisation requirements and our
transition or implementation period expectations.
will delay our Handbook review. We
intend to advance some aspects of Supervision: The firms we regulate
this work, beginning with the launch and their senior managers are
of an initial Discussion Paper in responsible for ensuring that
summer 2018. they act in accordance with our
principles and rules.  The focus
The issues we are exploring are of our supervision is to maintain
complex and challenging. It is right continuous oversight of regulated
that we consult our stakeholders and firms to identify, reduce or prevent
ask for their support and challenge harm to consumers and markets.

12
Financial Conduct Authority Chapter 1
Business Plan 2018/19 Our role

To do this, we take a forward- assess firms’ reactions to them and


looking and strategic approach. work with firms to understand how
This includes looking both at the they may play out. We then diagnose
conduct of individual firms and, more the likely harm to consumers or Proactively working
widely, at how retail and wholesale markets and which combination of with the most
markets are evolving. To supervise our tools will best address them. significant firms
effectively, we need a thorough This direct relationship with firms
understanding of the business ensures that we have a key source of allows us not only to
models, strategies and cultures of intelligence and trusted channels to diagnose the risk of
the firms we regulate. This allows us influence market behaviour. harm in that firm but
to recognise more effectively the
risks of harm that a firm, or group of Our prudential supervision work also to spot emerging
firms, pose. aims to avoid disorderly failure and market events
minimise the harm to consumers
We tailor our approach to or the integrity of the UK financial
supervision taking account of the system. This harm can be loss of
potential impact on consumers and money and confidence and reduced
markets. We give greater scrutiny participation in financial markets. So
and focus to the firms that pose the understanding a firm’s financial risks,
greatest risk of harm to consumers its proximity to failure and how harm
and market integrity. For firms that is minimised in the event of failure
pose less, but still significant, risk is an important component of our
of harm, we have a programme supervisory work.
of targeted engagement which
specifically focuses on the activities Competition: We are one of the few
with the greatest risk of harm in their financial regulators with a primary
sector. We assess sectors, markets objective to promote effective
and firms with similar business competition in the interests of
models to identify outliers and key consumers. Our work across
risks we need to address in our work wholesale and retail markets aims
with firms. to promote innovation and keep
markets open and competitive,
Proactively working with the most driving benefits to consumers and
significant firms in each sector the wider economy.
allows us not only to diagnose the
risk of harm in that firm but also
to spot emerging market events,
13
Chapter 1 Financial Conduct Authority
Our role Business Plan 2018/19

To advance our competition as well as market participants in We set out what we expect from
objective we do three things: secondary markets. Misconduct and those we regulate and consult
poor investor protection in capital widely before we finalise our rules
1. We look at the structure and markets can damage confidence in and guidance. We use evidence and
dynamics of markets through their integrity and effectiveness. This analysis to assess the costs and
our market studies and, where harms investors who suffer losses in benefits of our proposals to ensure
necessary, adjust our rules unfair markets and harms the broader that they are an effective and efficient
to improve the outcomes for UK economy by preventing the response to an identified harm.
consumers and to support stimulus that robust and fair capital
consumer choice markets provide. International: We ensure markets
work well, working collaboratively
2. We take action against The role we play in overseeing and with international partners to shape
anti-competitive behaviour, implementing change in the UK’s the global regulatory agenda. We
investigating breaches of the markets allows the full spectrum shape and lead changes in the
Competition Act 1998 and its of issuers to access deep and liquid international environment, for
EU equivalent pools of capital for growth. It aims example delivering the optimal
to guarantee that the process of regulatory response to EU
3. We ensure regulation promotes, price formation is robust and that all Withdrawal, focusing on minimising
rather than hinders, healthy participants can rely on it. It provides harm and proactively making the
competition. An important aspect investors with the appropriate most of opportunities.
of this is to support new and levels of protection they need to
innovative initiatives with firms sustain their confidence in market Regulatory perimeter: Our central
whose business models may test activity. In the secondary market, our focus is on the conduct of regulated
the boundaries of our current programme ranges from education activities. 3 As well as regulated
regulations through to enforcement, and aims activities, authorised firms also
to ensure there are strong conduct carry out activities that are outside
Enforcement: We take action standards and integrity in trading the regulatory perimeter but which
against firms and individuals where activity on UK markets. This helps have an impact on our objectives.
their behaviour fails to meet our ensure these markets function in For example, while the process
standards, is dishonest or illegal. Our the interests of investors and issuers for setting LIBOR was outside our
aim is to prevent consumer harm and alike, benefitting the broader UK perimeter, LIBOR malpractice had
damage to market integrity before it economy. a major impact on market integrity.
happens, or reduce further harm if it As Our Mission explains, we have
has already happened. Enforcement Policy: We use our policy-making powers to act outside the perimeter
has a particularly visible role in our powers to implement and maintain in certain circumstances. We will
regulation. Investigating misconduct a framework of rules and guidance be more likely to do this when the
fairly and promptly and holding those that reduces harm and make unregulated activity could potentially
responsible to account helps us to markets work better. Our policy work undermine confidence in the UK
maintain public confidence in the is guided by the following principles: financial system or have an impact
integrity and fairness of UK markets.  on a regulated activity. Where we
• Prioritising where we can add the decide we cannot or will not act,
We also tackle the consequences most public value. we will publicly explain why and, for
of misconduct including, where example, raise the matter with other
possible, seeking redress or remedy • Only making or supporting new bodies or regulators who are better
for those harmed. We explain where rules if they will be an effective and placed to deal with it or with the
and why we have taken action. This proportionate solution to an issue. Government.
ensures our actions are transparent
and fair and that those we regulate • Reviewing rules where they no
can use this information to evaluate longer achieve the right outcomes.
and improve their own conduct. We seek to influence and guide, and
align our work with, international
Market Oversight: We deliver public initiatives.
value to the wider economy through
our oversight of UK capital markets.
This includes overseeing the conduct
of issuance, issuer and sponsors,

3 Activities set out in FSMA 2000 and the Regulated Activities Order.

14
Investigating misconduct fairly
and promptly and holding those
responsible to account helps us
to maintain public confidence
in the integrity and fairness of
UK markets
Chapter 2 Financial Conduct Authority
EU Withdrawal Business Plan 2018/19

EU Withdrawal

The UK’s decision to leave the European Union (EU) We expect our work on the
has, and will continue to have, a substantial impact implications of EU Withdrawal
will continue beyond March 2019,
on the way we work. A significant proportion of our throughout any implementation
resources are already focused on the forthcoming exit, period. We will keep our EU
including arrangements to implement the change. Withdrawal priorities and
resources under review as we
To fulfil our regulatory objectives and provide technical gain greater certainty on the
support to the Government in the run up to withdrawal, outcome of negotiations and the
we have increased the level of resource dedicated to implementation timeframe.

co-ordinating and managing this work. Although our Annual Funding


Requirement has increased by £5m
The additional cost of our EU Withdrawal work outside to cover EU Withdrawal work, we have
our redeployed resources is £16m. We explain how we still made difficult and challenging
propose to fund this in our How we operate chapter. decisions about our priority activities
across all business areas that are not
related to work on EU Withdrawal,
including limiting the number of
new initiatives we’ve taken on. We
recognise the particular significance of
EU Withdrawal on wholesale financial
markets, investment management
and the general insurance sectors, and
We have made difficult and challenging our decisions have been driven by our
decisions about our priority activities that recognition of the capacity of industry
to absorb change.
are not related to work on EU Withdrawal
Existing financial regulation remains
in place, including EU regulation.

We expect the focus of our work on


EU Withdrawal in 2018/19 to be in the
following areas.

Working with the Government


We will:

• Continue to support the


Government and provide technical
assistance to negotiations with
the EU and other countries where
the Government seeks a free
trade agreement and where it is
appropriate for us to be involved.

16
Financial Conduct Authority Chapter 2
Business Plan 2018/19 EU Withdrawal

• Provide technical advice on the Future functions Our operations


legislation introduced by the
Government. The EU (Withdrawal) • We will ensure there is an appropriate • We will work towards achieving
Bill will convert existing EU legislation transition to a future model for operational readiness for our exit
into UK law, and preserve existing authorisation and supervision and the FCA overall, including
UK laws which implement EU of EEA firms. This will include considering the impacts on our
obligations. This will enable us to implementing the legislation on systems and technology.
have a robust regulatory system on the temporary permissions regime
the day the UK leaves the EU. if necessary, as announced by the
Treasury in December 2017. International cooperation
• Review our Handbook in light of the • We will continue to work with
legislative changes (including looking • The Treasury has stated that it
intends to provide us with functions regulatory authorities across the EU
at duty of care and the potential for and globally to ensure appropriate
increased automation) and make and powers for UK and non-UK
credit-rating agencies and trade supervisory cooperation and
changes where appropriate. information sharing in respect of
repositories. We will work closely
with the Government and with firms and markets, policies and
• Advise the Treasury and other future regulatory regimes.
areas of the Government on how UK credit-rating agencies and
the UK’s future relationship with trade repositories with the aim of
the EU may affect the financial ensuring a smooth transition to the
services industry and its users. This new UK regime.
includes considering cooperation
arrangements with the EEA
countries and the rest of the world. Supervision and risk
• We will continue to work with
• Assess the impact of transitional regulated firms to understand their
arrangements on the UK’s regulated plans for future operations and the
firms and their users, and take action impact on markets and consumers.
where appropriate.
• We will monitor the risks to our
• Continue to liaise closely with the regulatory objectives. We will also
Bank of England in our work on identify and consider potential
areas of joint responsibility and harms to consumers that may
dual-regulated firms. arise in the run-up to, and after,
withdrawal.

17
18
Financial Conduct Authority Chapter 3
Business Plan 2018/19 Our priorities for 2018/19

Our priorities for 2018/19

Our Business Plan sets out our main areas of focus across seven themes
that span the seven specific sectors we regulate. Preparing for and
implementing changes resulting from EU Withdrawal is inevitably the
priority for our discretionary activity. For 2018/19 we outline our approach
to delivering necessary changes across the sectors we regulate.

Many of the issues and risks covered This covers:


and the harms we address are complex
and often deep-seated problems
Tier 1: The efficiency of internal
that will continue to be priorities for
processes
future Business Plans. We will continue
to monitor these issues, such as We have worked to improve reporting
technological and societal change, and at each level. For example, we have
adapt our approach to the ever-evolving updated the way we report on our Service
landscape. Standards, which show how efficiently we
carry out specific internal processes. Our
Unexpected issues can arise and updated Service Standards document
priorities can change. So we ensure that provides a better explanation of the link
our processes for deciding priorities are between the efficiency of our processes
flexible and that our governance provides and outcomes.
sufficient challenge to change priorities
when needed. Tier 2: The impact of our interventions
Our key planned activities for this year are We have published our approach to
mainly set out in our cross-sector themes post-intervention evaluation alongside
because, in most cases, these issues this Business Plan. This explains how we
occur in several sectors. Under our sector will assess the effectiveness of some
priorities, we have cross-referenced significant interventions every year.
those pieces of work where relevant.
Tier 3: Outcomes in the sectors we
regulate
Measuring our performance
We intend to improve our approach
The Mission confirmed our three-tier further by building more indicators and
framework for performance reporting. reporting clearly on how we see the
market developing in subsequent years.
Our 2017/18 Annual Report and Accounts
will include examples of key indicators
that reflect some of the harms we have
prioritised. These indicators should be
understood in the context of wider
market information.

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Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19

Cross-sector priorities
Firms’ culture and governance
Firms’ culture and governance Our key activities
should drive behaviours and produce
outcomes that are likely to benefit XXX
Accountability and governance
consumers and markets. We will Lack of accountability of senior
XXX
continue to support and engage with management can drive poor
conduct, from selling unsuitable
firms, sharing our expectations and products to excessive risk taking or
working to promote effective cultures mis-selling, that harms those who
and governance across the industry. use financial services.
This will ensure that firms have the right We are working on finalising the
people in the right roles, working in the rules for the extension of the Senior
interest of consumers. It will also make Managers and Certification Regime
(SM&CR) to all FSMA firms, including
sure that markets and our stakeholders dual-regulated insurers (FCA and
understand our approach. PRA regulated). Our proposals
will reflect our intention to tailor
We expect firms to be able to demonstrate that their
the extended regime to reflect
purpose, leadership, governance arrangements and
the different risks, impact and
approach to rewarding and managing staff do not lead
complexity of firms in a clear, simple
to avoidable or unnecessary harm to their customers.
and proportionate way. In total, the
This should be a collaborative effort driven forward by
SM&CR will cover approximately
staff at all levels. We support individuals who contact
47,000 firms. We intend to publish
us as whistleblowers and we ensure that they are
our Policy Statement and new rules
provided with the anonymity they need.
in summer 2018.
We believe it is important that all firms, regardless
The Treasury has confirmed the
of size, are well governed and that individuals are
Regime will start for insurers on
accountable for their actions. Firms should be able
10 December 2018. It will confirm
to show the effectiveness of their governance
the date for when these rules
arrangements in identifying, managing and mitigating
commence for solo-regulated firms
the risk of harm.
(firms regulated only by the FCA,
rather than by both the FCA and the
PRA) in due course. We will work with
firms to ensure that the regime is
implemented effectively.

Establishing a public register


In July 2017, we published proposals to
extend the SM&CR to all FSMA firms.
Under these proposals, only senior
managers will appear on the Financial
Services Register. We have received
substantial feedback on this and will
consult by summer 2018 on policy
proposals to introduce a public register.

20
Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities

Remuneration
We have published a Policy
Statement that explains how
consumer credit firms can
improve how they manage the
risks that their staff incentives,
remuneration and performance
management policies may pose
to consumers. We will review
how firms respond to this Policy
Statement.

We will also take a broader


look at all firms’ remuneration
arrangements in 2018/19 to
identify the potential or actual
harm from the remuneration
schemes of firms that are not
subject to our Remuneration
Codes.

Monitoring change
We do not attempt to measure or
assess culture directly; instead
we seek to form judgements as to
whether the drivers of behaviour
we are interested in as a regulator
are driving appropriate behaviours
which are unlikely to cause harm.
This includes looking at firms’
remuneration practices and the
number of whistleblowing cases
we receive to determine the
effectiveness of firms’ internal
processes and whether they meet
our expectations.

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Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19

Cross-sector priorities
Financial crime (fraud & scams)
and anti-money laundering (AML) Our key activities
The safeguards we put in place to Along with the work set out below,
our proactive work to tackle market
prevent financial crime are designed abuse (covered under the Wholesale
to make the UK and the financial section) is an important way in which
services sector a hostile place for we seek to combat financial crime.
criminals, a safe place for consumers,
Tackling money laundering
and ensure we meet latest
international standards. Our permanent programme of work
includes regular inspections of the
Financial crime, including money laundering, harms largest firms, as well as other firms
society and the wider economy by causing financial loss that we believe present high money
to victims and enabling criminal activity. The UK’s financial laundering risk. This work, alongside
markets are very large, complex and operate globally. This our supervision and authorisation
makes them attractive to money launderers and other frameworks, enables us to identify
criminals who operate across borders. and reduce the potential for firms
to be used for money laundering
We want to ensure that the safeguards in place are and other financial crime. We use
proportionate, operate efficiently and minimise the full range of supervision and
any unintended consequences of regulation. We regulatory enforcement tools
also want to reduce and prevent the harm caused in our financial crime work. This
by scams and increase consumer awareness of the includes authorisation interviews,
dangers of fraud. proactive and reactive supervisory
work, consumer alerts, FCA-led or
jointly-run education programmes,
as well as enforcement tools such as
business restrictions and regulatory
and criminal investigations.

The UK’s financial markets are large, We use intelligence, including liaising
with other agencies in the UK and
complex and operate globally. This internationally, to support the work
makes them attractive to money we do to supervise and enforce our
principles and rules. We also conduct
launderers and other criminals random sampling of small, lower-
risk firms to ensure they maintain
high standards and check that our
assessment of risks in different
sectors remains current.

Building a better picture of


money laundering
The recently published UK National
Risk Assessment of Money
Laundering and Terrorist Financing
identified that the UK needs a
more comprehensive picture of
how capital markets are being
used for money laundering. We will
undertake diagnostic work on this

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Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities

issue to enable us to decide the Taking account of FATF Mutual We collaborate with law
best approach, covering a range Evaluation recommendations enforcement partners and other
of different firms. Better systems agencies at home and abroad
We are a major participant in the UK
and controls in capital markets will on AML, scams and other types
delegation to the Financial Action Task
protect society as a whole, as well of financial crime, to help the
Force (FATF). We have been closely
as the integrity of the UK’s financial relevant organisations take action.
involved in the preparation for the
system and of the global financial This year, we will convene an
FATF’s Mutual Evaluation of the UK
framework. We are also undertaking international TechSprint. This will
which will conclude in October 2018.
diagnostic work on money laundering bring together a range of experts
We will continue to review and refine
and terrorist financing risks in the to explore whether new technology
our AML supervisory approach and
e-money sector. This is important can be used more effectively to
take account of any recommendations
because if e-money firms have fight financial crime. Working in
from FATF’s evaluation.
ineffective systems and controls this collaboration with others improves
could undermine confidence and intelligence-sharing arrangements
participation in e-money services Raising awareness of fraud to help fight money laundering and
and the integrity of the financial and scams financial crime. This leads to more
system. We will share our findings in The aim of our ScamSmart effective and consistent standards
Q2 2018/19. communication campaign is to help and ultimately delivers better
protect consumers from falling outcomes.
The new Office for Professional Body
victim to investment fraud. Scams
Anti-Money Laundering Supervision
are becoming more sophisticated,
(OPBAS) was established in
while consumers’ increased use of
February 2018. OPBAS oversees 22
data sharing and social media can
professional body supervisors for
also make them more susceptible
anti-money laundering. OPBAS aims
to fraud. Scams continually evolve
to ensure a robust and consistent
and there is now a significant overlap
standard of AML supervision
between pension and investment
across the legal and accountancy
fraud. In 2018 we will work with
sectors, and improve and enable
The Pensions Regulator to deliver Monitoring change
collaboration and information
a single, co-ordinated awareness
and intelligence sharing between We assess the quality of firms’
campaign to tackle pension and
professional body AML supervisors, AML controls and consumers’
investment scams.
statutory supervisors and law use of our online resources, such
enforcement agencies. as ScamSmart, as one indicator
Collaborating with our partners and of whether the potential harm to
In December 2017, the Home other agencies consumers and market integrity
Secretary announced a package of Not all fraud and scams fall within in this area is likely to have
measures to tackle economic crime. our remit but we have a range of reduced.
We are working closely with the enforcement action to tackle those
Government and industry on reform that do. These include civil court OPBAS will monitor the
of the suspicious activity reporting action to stop activity and freeze quality and consistency of the
regime and to establish a new National assets, insolvency proceedings, professional bodies’ own efforts
Economic Crime Centre. We will prohibiting individuals from financial to supervise their members’
continue to use intelligence, including services roles and, for the most money laundering controls and
from whistleblowers, to make it more serious cases, criminal prosecution. how effectively information
difficult for money launderers to use is being shared between their
the financial system. members and law enforcement.
We believe that effective
information-sharing is essential
to tackling the harm that arises
from financial crime.

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Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19

Cross-sector priorities
Data security, resilience
and outsourcing Our key activities
Technology plays a pivotal role in Addressing industry’s operational
delivering financial products and resilience
services. It enables firms’ innovation Our aim is to help firms to become
(see the Innovation, big data, more resilient to cyber-attacks, to
enhance market integrity and to
technology and competition cross- protect consumers.
sector theme) and supports their
business strategies. New technologies Over the next year, we will strengthen
our supervisory assessments of
can lead to harm if they are not safely the highest impact firms to better
adopted and managed. For example, understand their current and planned
new technologies such as distributed use of technology, resilience to
cyber-attacks and staff expertise.
ledger (blockchain) and artificial We will also review how governance,
intelligence rely on access to sensitive strategy, systems architecture, risk
and high quality data. But new management and culture contribute
to firms’ data security. This will ensure
technologies present opportunities we can better assess potential harm
for helping firms to meet Know Your and explain to firms what we expect
Customer or anti-money laundering from them. Where necessary, we
will ensure they address any specific
requirements more efficiently. issues we have found.
Cyber-attacks in the financial services sector are
becoming more frequent and widespread. This is We will also conduct focused
potentially made worse by the use of complex and thematic work with ‘lower impact’
ageing IT systems, outsourcing of operations and the firms, based on harms we have
growing transfer of data between firms. identified in each sector. This
could include firms that are new
Our work focuses on ensuring that firms are more to financial services as well as
resilient to cyber-attacks and technology outages, so established firms. We will continue
reducing the risk and frequency of disruption and also the communications approach we
ensuring new and replacement technologies began in 2017/18 and give smaller
are resilient. firms additional information on
how to improve their resilience.
We work closely with global bodies such as Our approach to cyber resilience
the International Organisation of Securities is aligned to the UK’s National
Commissions (IOSCO), Group of Seven (G7), Financial Cyber Security Strategy and we will
Stability Board (FSB) and others who prioritise data continue to work closely with the
security, resilience and outsourcing. National Cyber Security Centre
(NCSC) to share good practice
with industry.

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Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities

Cyber security is a shared


responsibility, and we take a
Joining up our work on resilience Monitoring change
We will also look at risks to
co-operative approach to address To monitor the risk of harm to
firms’ resilience. These include
this threat, working with the consumers, we look at firms’
ring-fencing where significant
Government, other regulators, resilience and their ability to keep
restructuring, with the potential
nationally and internationally on this systems running in the event of
to affect resilience, will continue
important issue. Working with the major operational problems. We
into 2018. Our implementation
Bank of England, we will continue to look for reduction in any impact
of PSD2 will continue to evolve.
develop regulatory tools to better on consumers caused by IT issues
While it will increase competition in
assess firms and identify where harm and cyber-attacks.
payments, it also has the potential
could occur. We will also continue
to increase cyber attacks and
to work with firms to minimise the
data breaches. From August
impact of breaches and systems
2018, we will monitor the roll-out
failures on consumers and the
of the Competition and Markets
market, liaising closely with the
Authority recommendations to
Bank of England, the Treasury, the
measure consumer understanding
National Cyber Security Centre and
of resilience by requiring firms to
the National Crime Agency.
publish service quality data on
technology and resilience issues.
Assessing the risks of outsourcing
and third-party providers
An increasing number of firms are
outsourcing the delivery of major and
critical services often to unregulated
providers. Regulated firms should
have appropriate oversight and One area we are focusing
control over third-party providers
and take responsibility for the on is outsourcing
service they provide. Doing so will
reduce the risk of third-party failures
arrangements where the
or weak controls which could lead to service provider supports
operational disruption, unauthorised
loss or disclosure of consumer data. many firms and so the
One area we are focusing on is
impact of any disruption
outsourcing arrangements where is magnified
the service provider supports
many firms and so the impact of
any disruption is magnified. Over
2018/19, we will increase our
understanding of both outsourced
services and core infrastructure
provision across different sectors
through several pieces of thematic
and firm-specific work. This will
include diagnosing how firms use
third parties, their concentration in
the market and the potential harm
that results.

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Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19

Cross-sector priorities
Innovation, big data, technology
and competition Our key activities
Financial Technology (FinTech4) is Assisting firms through the FCA
already driving change in markets and Innovate programme
encouraging further innovation. It is Our FCA Innovate programme provides
increasing competition and reducing assistance to firms which are using
innovation to improve consumer
costs, offering consumers better value outcomes. We help them better
products and services and easier ways understand our rules, processes and
for firms and consumers to engage guidance. In turn, this helps us keep
ahead of developing trends and potential
with each other. For many consumers harms in the market, including in new
it has already improved access to areas such as initial coin offerings and
products and services. Increasing distributed ledger technology.
amounts of data from a wider range
Allowing firms to test viability in the
of sources, alongside sophisticated regulatory sandbox
analytical tools, can improve pricing,
Our regulatory sandbox gives
access and service for consumers, businesses of every size the
including those who may previously not opportunity to test the commercial
have been able to access services. and regulatory viability of their
innovative concepts before they invest
The increased use of big data also has the potential more heavily in them, while providing
to cause harm. There is a risk that if technology and safeguards for consumers. The
innovation move too quickly, the more vulnerable in sandbox also gives us an understanding
society could be at a disadvantage. As both old and of the opportunities and risks of harm
new firms grapple with the challenges and benefits of that innovation can create.
innovation we also expect them to develop plans to
deal with those who are more vulnerable. Problems Over the coming year we will undertake
can also occur because of data loss and weak cyber work that uses lessons we have learned
resilience. This theme is strongly linked to our since the sandbox was created in 2016.
cross-sector theme of ‘Data security, resilience and We aim to further reduce unnecessary
outsourcing’. barriers to entry for innovative firms.

Our approach is to sustain a regulatory environment


Global sandbox
where consumers and firms can maximise the
opportunities of competition, innovation and big data Our sandbox currently only allows firms
while reducing or mitigating the associated harms. to conduct tests in the UK but many
aspects of financial markets and FinTech
are global. We are hearing from firms that
there is real value in being able to operate
globally. This would involve working with
other regulators across the globe to
conduct tests in different jurisdictions
at the same time. Last month we invited
stakeholders to share their views on what
a global sandbox could look like; there is a
lot of interest in the idea of cross-border
4 ‘FinTech’ is the term which describes the intersection between finance and testing and the benefits this could bring,
technology. It can refer to technical innovation applied in a traditional financial such as reducing cost and complexity
services context or to innovative financial services that disrupt the existing
financial services market.
and accelerating expansion into other

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Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities

jurisdictions – especially for start-ups data pools, algo trading and wider business models without putting
who are keen to expand internationally. artificial intelligence. This work will consumers at unacceptable risk.
help us better assess both potential
Over the next few months we will opportunities and harm and where we We will finalise the proposed
work with interested regulators on a may need to intervene. new rules and publish them for
blueprint of the global sandbox. consultation in 2018.
We will further develop our relationship
with the Information Commissioner’s
Testing and applying RegTech and Cryptocurrencies
Office as the General Data Protection
advanced analytics
Regulation (GDPR) comes into Cryptocurrencies has been an area
RegTech describes new technologies force in May 2018. We will then of increasing interest for markets
developed to help overcome regulatory publish an updated Memorandum of and regulators globally. In the
challenges faced by financial services Understanding setting out how we will UK, the Treasury Committee has
firms. In 2018/19 we will take forward work together in future. announced that it will be launching
work to deliver cost savings, both for an enquiry, to which we intend
firms submitting regulatory returns to to respond.
Reviewing retail banking
us and in how we use this information.
business models
At the start of 2018 we published a Call Cryptocurrencies themselves
for Input which summarised our work to This review looks at the core (i.e. those designed primarily as
date on machine executable regulatory differences between emerging and a means of payment/exchange)
reporting and the ‘proof of concept’ traditional retail banking business are not currently within our
developed during our November 2017 models. It assesses how these regulatory perimeter. However,
TechSprint. In summer 2018 we will differences are being driven by some models of use or packaging
publish a feedback statement that technological change and innovation cryptocurrencies bring them
brings together the results of the and how they affect competition and within our perimeter, making the
feedback from this Call for Input and firms’ conduct. We particularly want to landscape complex.
further industry discussions. understand what impact the growing
use of digital channels and declining Last year, we issued consumer
Some of the experiments we are use of branches is having on business warnings on cryptocurrency
conducting with advanced analytics models and the implications of this for Contracts for Difference and
over this year include: consumers. the risks of Initial Coin Offerings
(ICOs). We will work with the Bank of
• automated detection of We are analysing the information we England and the Treasury as part of
unauthorised business activity on have collected from retail banks. We a taskforce to develop thinking and
the internet through a variety of new will publish an update in the first half publish a Discussion Paper later this
technologies of 2018, explaining the results of this year outlining our policy thinking on
preliminary analysis and our proposed cryptocurrencies.
• testing advanced Natural next steps.
Language Processing (NLP)
technologies and semantic
Crowdfunding post-implementation
language models in an effort to
review
automate what would otherwise
be manual supervisory tasks Crowdfunding markets are Monitoring change
continuing to develop rapidly.
• automated evaluation and detection Since the publication of our To see whether FinTech is helping
of misleading advertising interim feedback in 2016, we have to improve competition in the
been working on additional rules interest of consumers, we will look
The automated processes will allow to address areas of concern, at metrics such as the number of
us to review the total population of in particular for loan-based new entrants to the market and
high-risk markets, rather than only crowdfunding. This has been an the emergence of new innovative
sampling a proportion. extensive process due to the products to meet consumer
continually evolving market but we needs. We continue to measure
Reviewing firms’ use of data need to ensure that there remains an feedback and the number of
appropriate framework for regulating firms we help through our FCA
We will review the use of data by the crowdfunding industry. We want Innovate work.
financial services firms, including a sector that can innovate, compete
machine learning analysis of big and challenge established firms and
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Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19

Cross-sector priorities
Treatment of existing customers
Our aim is to ensure that existing Our key activities
customers enjoy the benefits
of increased competition and Understanding firms’ pricing
practices in retail general insurance
innovation. Firms should not give
In 2018/19 we will continue work on
longstanding customers less attention pricing practices in retail general
than new customers or treat them in a insurance. We will conclude the first
way which results in poorer outcomes. phase of our diagnostic work to give
us a better understanding of retail
All customers should be well informed general insurers’ and intermediaries’
about the financial products they pricing practices and how these affect
buy or are invested in, including household insurance customers. This
work has also looked at the types of
performance and charges. systems and data that firms use to
If competition is working well in a market, it should decide the final price to consumers
not overly disadvantage existing customers over new and the governance and oversight
customers. While many firms have made progress in arrangements within firms.
putting customers more firmly at the centre of their
business models, they need to further improve both Drawing on the emerging themes
competition and their standards of treatment for from that work, our earlier Call for Input
existing customers. on Big Data in retail general insurance
and recent public debate, we are
currently scoping work to formalise
that debate and to assess whether we
need to act to ensure future insurance
pricing practices support a market
While claims management companies that works well for its customers. We
will publish details of the scope of this
can provide access to justice, some work in due course.
firms may not always operate in
consumers’ best interests Regulation of claims
management companies
We expect to take over the
responsibility of regulating claims
management companies (CMCs)
from the Ministry of Justice, subject
to legislation, in spring 2019. While
CMCs can provide access to justice
for consumers who may be unwilling
or unable to bring a claim themselves,
some firms may not always operate
in consumers’ best interests. We are
developing a package of information
to ensure CMCs are clear about the
rules and principles they will have
to meet when we take over their
regulation. We will also continue to
build our knowledge of the sector and
consult on draft rules to deliver robust
regulation to protect consumers later
this year.
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Financial Conduct Authority Chapter 4
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Assessing claims inflation in Any proposals we make as a result


of our High-Cost Credit Review will
Monitoring change
general insurance
take account of the impact these To see whether existing
We will carry out diagnostic work remedies may have on consumers customers are being treated fairly,
to assess how far brokers and and the wider market. We will also we consider firms’ practices,
motor insurers are inflating claims report our findings from our trials how easy it is for customers to
through referrals to CMCs and of prompts and alerts to improve compare products and services
keeping volume discounts from their consumers’ engagement with their across providers and to switch
own repairers. This will give us an overdraft use and charges, as well between them.
understanding of the issues CMCs as their awareness of the potential
will need to address when we take benefits of switching.
over their regulation.

Providing access to Alternative


Helping consumers make informed Dispute Resolution for Small and
decisions on their insurance needs Medium-sized Enterprises (SMEs)
To help consumers make informed We believe our rules broadly strike
decisions about insurance needs, the right balance between protecting
we published the second set of businesses and ensuring SMEs can
data from our value measures pilot access financial services. However,
in March 2018. This year, we will we are concerned that many SMEs
evaluate the extent to which the struggle to resolve disputes with
data collected have influenced financial services firms and seek
behaviours and decide whether redress. Given this, we are consulting
to conduct a third pilot. We have on proposed new rules that will allow
already seen examples of where more SMEs to refer disputes to the
publishing the first set of data Financial Ombudsman Service. We will
has incentivised insurers to make consider feedback to this consultation
product improvements and focus and publish a Policy Statement with
more on overall product value. We our final rules in summer 2018.
expect that stakeholders’ use of
the published data will help increase
market focus on suitability and value, Competition in the
as well as the headline price. cash savings market
We have implemented a number of
Improving competition in remedies as a result of our 2015 cash
current accounts savings market study to improve the
switching process and the way firms
Our rules now require retail communicate with their customers.
banks and building societies to However, we remain concerned that
publish standardised, comparable providers hold a significant amount
information about personal and of customers’ savings balances
small business current account in accounts opened long ago (eg
services. This information will more than five years ago). Yet these
be published for the first time in accounts tend to pay lower interest
August 2018, to coincide with the rates than those opened more
publication of service quality survey recently. So we continue to explore
data required by the CMA. whether competition in the cash
savings market could be improved,
In 2018/19, we will report on our work particularly to ensure the fair
on the monthly maximum charge treatment of longstanding consumers.
(MMC) for unarranged overdrafts,
introduced by the CMA in 2017.

29
Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19

Cross-sector priorities
Long-term savings and pensions
and intergenerational differences Our key activities
Our work on long-term savings and Retirement Outcomes Review
pensions and intergenerational Since we published the interim
differences covers a broad group report from our Retirement
Outcomes Review, with potential
of issues around the changing UK remedies, we have received
population and their financial needs. feedback and undertaken further
In some sectors, including pensions analysis on the types and level of
consumer harm that drawdown
and retirement income, retail banking, charges and investment choices may
general insurance and protection and cause. We will publish our final report
retail lending, some older consumers’ in 2018, together with a Consultation
Paper on our proposed remedies.
financial services needs are not being
fully met, resulting in exclusion, poor
Unsuitable pension transfer advice
customer outcomes and potential harm.
Some firms have responded to
An ageing population, increased life expectancy the pension reforms by changing
and individuals taking on more responsibility for their business models in ways
financing their longevity shows that our society that potentially cause harm to
is undergoing dramatic social and demographic consumers. We will not hesitate
change. The pronounced fall in real interest rates has to intervene, where necessary, if
reduced savings growth and created concerns that we see evidence of firms providing
consumers may be unable to meet their expectations unsuitable pension transfer advice.
of sufficient retirement savings. We will be collecting data from all
firms that have pension transfer
Additionally, the reduced cost of servicing household permission to assess practices
debt has created an incentive to borrow, while the across the entire market. Our work
cost of building up assets to support retirement will identify the extent of consumer
income has gone up. harm and where and how we can
intervene most effectively to stop it.

Savings adequacy work


We are undertaking a piece of
research looking at the levels of
undersaving for retirement. As part
We will not hesitate to intervene, of this project, we are investigating
which consumer groups are most
where necessary, if we see at risk of experiencing a shortfall in
their expected retirement provision.
evidence of firms providing
unsuitable pension transfer advice Effective competition in
non-workplace pensions
We are continuing our diagnostic
work to better understand the
market for non-workplace pensions.
In particular, we are exploring
whether the weaknesses previously

30
Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities

identified in the workplace


pensions market exist, in whole
or in part, in the market for non-
workplace pensions. We also want
to understand:

• whether providers are competing


on charges

• if there are barriers to consumers


identifying, and choosing, from
more competitive products

• how the differences and


similarities between the
workplace and non-workplace
markets impact competition and
consumer outcomes

We will assess the feedback


received from our Discussion
Paper and data request and publish
a Feedback Statement by the end
of 2018.

Monitoring change
We will use a variety of metrics,
particularly through our
diagnostic work, to assess how
consumers are saving and how
this varies across generations.
The measures in this cross-sector
theme are likely to link to our
outcome indicators in Pensions
and retirement income and
Retail investments.

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Chapter 4 Financial Conduct Authority
Cross-sector priorities Business Plan 2018/19

Cross-sector priorities
High-cost credit
We have already made a significant Our key activities
impact in the high-cost credit
Alternatives to high-cost credit
market. We have taken action
For low-income, high-risk
to protect potentially vulnerable consumers, even in a well-regulated
consumers by putting in place new sector, borrowing remains expensive
rules for high-cost short-term credit and the consequences can create
harm for consumers. Drawing on
firms. We have taken supervisory and our research and our extensive
enforcement action against non- stakeholder discussions, we have
compliance across all credit markets. identified key issues that can
create barriers to the expansion
Our work on high-cost credit complements our work of alternatives to high-cost credit.
on Retail lending which covers the wider borrowing These include access to sustainable
needs of consumers across mortgages and capital, lack of access to alternative
consumer credit. lending options and uncertainty
about regulatory requirements from
The harms caused by high-cost credit products tend
organisations such as Registered
to disproportionately affect vulnerable consumers
Social Landlords referring
who may turn to them in financial difficulty. We have
consumers to lenders.
a responsibility to ensure there is a framework of
rules that allows consumers access to products and As part of our ongoing review of
services that are suitable, affordable and right for high-cost credit, we will look at
their circumstances. solutions designed to increase
the choice and availability of
We want to send a clear message to firms and
alternatives to high-cost credit.
consumers that more work is needed in some parts
We will also consider the options to
of the market to improve consumer protection.
improve transparency of regulatory
requirements and, if needed, will
consult on further guidance and
rule changes.

Our High-Cost Credit Review


focuses on specific high-cost credit
markets where we consider there
may be a need for additional rules
and guidance. We explain the specific
problems we intend to address
We want to send a clear message regarding the different products.

to firms and consumers that more


work is needed in some parts of
the market to improve consumer
protection

32
Financial Conduct Authority Chapter 4
Business Plan 2018/19 Cross-sector priorities

Rent-to-own We will complete analysis of firms’


policies and practices, including
Monitoring change
We are examining firms’ pricing
the information they provide to Our review will give an overview
policies for rent-to-own services,
customers. We will also publish the of how this market is changing
including charges for add-ons like
results of consumer research into and where we can intervene to
insurance and warranties which can
how consumers use these products have the most impact. We will
substantially increase the overall
and their impact. Using this new also look at measures such as the
amounts consumers pay. We have
information, we will consult on any volume of complaints, arrears and
previously examined the extent
changes we consider we need to default rates for high-cost credit
to which behavioural biases can
make in 2018. products.
affect the choices consumer make
about add-ons. We will assess the
potential impact of these costs on Arranged and unarranged
consumers’ finances and whether overdrafts
consumers consider the costs or
We remain concerned about
value of these products before
the long-term use of arranged
buying them.
overdrafts at levels which can be
persistent and unsustainable,
Home-collected credit and the use and high charges of
unarranged overdrafts.
Some forms of refinancing loans
may result in consumers paying
Arranged and unarranged overdrafts
significantly more interest on
cannot be considered in isolation of
the amounts originally borrowed.
one another or of the wider current
This can happen when consumers
accounts offered by firms. So, to
take out additional borrowing that
reduce the risks of unintended
incorporates the outstanding
effects, we will use the evidence
balance from the previous loan into
and insight from the Strategic
the new loan.
Review of Retail Banking Models (see
Innovation, big data, technology and
We recognise that consumers
competition) to inform our exact
value continuing access to home-
design of any package of remedies.
collected credit and that weekly
repayments on separate loans
We aim to consult on measures
may not be affordable, but we are
around overdrafts to address
examining if repeat borrowing could
low customer engagement,
work better for consumers. This year
promote competition and improve
we will consult on any changes we
transparency for customers in
need to make to improve outcomes
May 2018. Subsequently, we will
for consumers.
use the evidence and insight from
the Strategic Review to inform the
Catalogue credit exact design of any wider package
of remedies. We will therefore look
We are examining potential concerns
to consult on any further remedies
about the high level of arrears among
towards the end of 2018 taking
catalogue credit customers, the fees
into account the findings of the
and charges this triggers and the
Strategic Review.
related risk of financial distress. We
are also looking at the complexity
of these products and how this can
affect consumers.

33
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

Sector priorities
Wholesale financial markets

The UK is a leading international financial centre and Our work is concentrated on four
broad principal drivers of harm in
plays a key role in global wholesale financial markets. wholesale markets.
Healthy wholesale financial markets enable firms and
governments to access short-term finance and First, market participants that
undermine clean markets through
long-term capital to provide investment opportunities financial crime and market abuse.
for retail and institutional investors, undertake The integrity of the UK financial
domestic and international trade, and fund growth. system suffers if those undertaking
unlawful activities benefit at the
Their effectiveness relies on them being visibly fair, expense of others.
transparent and efficient. So clean markets where
competition works well are vital to the UK’s prosperity, Second, market participants
failing to deal with each other
and we have a role in facilitating this. appropriately. This could be either
through conflicts of interests, poor
governance or weak oversight.
These conflicts can affect the
incentive for dealers to act in their
client’s best interest, resulting
in clients buying unsuitable or
overpriced products.

Thirdly, fast-paced technology


changes coupled with poor
operational controls leading to
company failures, successful
cyber-attacks and market turbulence
(eg flash crashes) can harm both
market participants and the wider
economy.

Finally, we identify markets, such


as primary markets, that are not
working as well as they could be.
We intervene, where appropriate,
to improve their efficiency and
effectiveness so that they can better
serve their users.

Work on EU Withdrawal will be a


key focus of our activities in the
wholesale financial markets.

34
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

Our key activities Promoting clean financial markets In 2018/19 we will carry out a
thematic review to increase our
Insider dealing illegally exploits
Clarifying our approach to understanding and assessment
privileged information for profit,
market integrity of the harms caused by money
disadvantaging those who abide by
laundering in capital markets (see
Wholesale financial markets are the rules. Market manipulation and
Financial crime (fraud and scams)
complex. They have undergone other forms of market abuse distort
and anti-money laundering).
large-scale and complex regulatory the effective allocation of capital,
change, including the Markets in damage competition and reduce
Financial Instruments Directive confidence in market fairness
(MiFID II) and the Market Abuse and integrity.
Regulation (MAR). Technology
and innovation are affecting their MiFID II has updated the transaction
business models and their users have reporting regime. The regime’s scope
different levels of sophistication. All has been significantly expanded
of this creates particular challenges across new instruments and asset
for firms and individuals who need to classes, providing more information
be clear about the conduct that we on transactions. Over the next
expect of them. To provide necessary year, we will monitor, detect and
clarity and certainty, in 2018/19 we investigate potential abuse in these
will publish a document outlining markets and enforce against unlawful
our ‘Approach to Market Integrity’. behaviour where appropriate. We will
It will help firms and individuals to focus our supervision monitoring on
take responsibility for their part in the fixed income, commodity and
maintaining clean, fair, effective and non-standard derivative markets.
competitive markets and be clear These have previously received
about our approach to regulating less focus than equities, but make
these markets. up a large and important part of the
wholesale financial markets.

35
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

Addressing conflicts of interest investments. 5 Markets need to be


able to trust that the rates set are fair
Conflicts of interest and a lack of
MiFID II provides us clarity by market participants about
and accurately reflect the underlying
with better tools to the capacity they are acting in
markets. Additionally, benchmarks
based on judgements rather than
deal with potential causes harm in wholesale markets.
observable transactions, particularly
This includes participants overpaying
harms from algorithmic for services or products, purchasing
those with less active underlying
High-Frequency poorly performing products and
markets to support them, can be
manipulated more easily.
Trading (HFT) by buying products or services that do
not meet their needs.
introducing new It is potentially unsustainable, and
obligations and MiFID II introduced a number of
undesirable, for market participants
to rely indefinitely on reference rates
systems and controls requirements, such as new rules
that do not have active underlying
around research unbundling, best
for both traders execution and restricting the
markets to support them. Given
and venues practice of payment for order flow.
this, we will not require banks to
continue to submit to LIBOR after
Our supervision work will focus on
the end of 2021. So those who
ensuring that firms are complying
currently use the rate will need to
with these changes and we will assess
actively plan during the next three
if the rules are working as intended.
years for the possibility that LIBOR
will not be produced after this date.
Our work last year on the
We are working closely with the
effectiveness of primary markets
Bank of England and other market
found that users of the IPO process
participants to develop SONIA6 as an
are harmed because of a lack of
alternative sterling risk-free rate.
timely and high-quality information
during the IPO process. Investor
As in other sectors, technology
information is driven by ‘connected
plays a central and developing role
research’. This hampers the
in wholesale financial markets.
efficiency and integrity of the price
Fast-paced technological changes,
formation process and impairs its
such as artificial intelligence,
effectiveness as a way of supporting
algorithms and machine learning
the broader economy. Over 2018/19
can result in faster decision making,
we will monitor firm compliance
innovation, increased competition
with new requirements to address
and reduced costs. But weak
conflicts of interest in producing
controls and poor understanding
connected research.
of the new technology can result in
systems failures, poor design and
Addressing operational resilience inappropriate use. This can lead to
Wholesale markets rely on significant harm, including major
their infrastructure - trading service interruption, financial loss
venues, benchmarks and other and potential systemic harm in
administrative services. This wholesale financial markets.
infrastructure needs to be reliable
MiFID II provides us with better tools
and resilient to operational outages,
to deal with potential harms from
whether caused by cyber-attack or
algorithmic High-Frequency Trading
traditional operational failures.
(HFT) by introducing new obligations
Benchmarks are fundamental and systems and controls for both
elements of financial markets’ traders and venues. We will focus
infrastructure. Trustworthy supervisory efforts on monitoring
benchmarks enable individual savers compliance with these new rules and
and institutional investors to assess increasing our understanding of the
use of trading algorithms and other

5 Previous analysis, has shown that regulation has improved the accuracy of the Intercontinental Exchange (ICE) Swap rate benchmark, as well as the liquidity of the underlying
market: see Occasional Paper No.27: Benchmark Regulation and Market Quality.
6 www.fca.org.uk/news/press-releases/bank-fca-launch-next-phase-sterling-libor-transition-work

36
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

innovations across the wholesale up work will depend on the outcome encourage the industry to develop
financial markets. We will use existing of EU Withdrawal negotiations and and adopt new codes for firms to
diagnostic work on HFTs, circuit clarity on future arrangements. But we achieve strong conduct standards.
breakers and mini-flash crashes to expect to complete a more specific These standards can be a useful
inform this work. This will enable us aspect of further work aimed at issuers way for the industry to police itself in
to anticipate and deal with potential controlled by sovereign countries. support of our regulatory work, and
harms this kind of technological can help firms to communicate what
advancement may create. We have already begun preparations they expect from their senior staff
for the Europe-wide adoption of when linked to the Senior Managers
electronic filing of annual reports in and Certification Regime.
Effectiveness of primary and
formats supporting structured data,
secondary markets
due to come into force in 2020 and
Poorly functioning primary markets we will be progressing this further Outcome indicators
lead to badly allocated economic in 2018/19.
resources and capital. The UK IPO We will use indicators such as market
process plays a vital role in helping MiFID II introduced important cleanliness data and the number of
companies raise finance and changes to the wholesale market suspicious transaction and order
provides investment opportunities structure by establishing new reports to assess the potential harm
for a wide range of investors. For trading venues and, in some from market abuse which damages
example, between 2011 and 2015, instances, limiting the amount of confidence and participation in
a total of 460 companies floated on trading that takes place outside the market.
the London Stock Exchange, raising organised venues. These changes
an estimated £53 billion7 (including may have a significant impact on
capital raised on the Alternative wholesale financial markets, for
Investment Market (AIM)). example in 2016 a total £5,375
billion of UK equities were traded via
Recently, our work has focused on over-the-counter trading.9 There
two key drivers of harm in primary may be important unintended
markets. The first is the disparity in consequences to these regulatory
the information provided to investors changes, such as less liquidity in
during the IPO processes and the some markets. We will undertake
second is the difficulties market monitoring and diagnostic work to
participants had in interpreting our ensure that we can anticipate any
Listings Rules. such changes and act if we consider
that they may lead to potential harm.
During 2018/19 we will monitor
firms’ compliance with the final rules
Industry codes of conduct
on IPOs we made last year. We will
assess if the rules are working as Many of the recent conduct issues
intended and if firms are making the that have caused harm in wholesale
right information available at the financial markets involved authorised
right time during the UK IPO process. firms carrying out activities that
are outside our remit (known as
Following our review of the the ‘regulatory perimeter’). While
effectiveness of primary markets8 voluntary industry codes can help
three topics require further focus: raise standards of market conduct,
the future structure of the UK listing historically their status has been
regime (premium listing and standard unclear and they have lacked teeth.
listing), the provision of patient capital
to companies that require long-term So last year we proposed to recognise
investment and retail access to some industry codes of conduct for
debt markets. As elements of these unregulated markets and in 2018
topics are based on powers from EU we will publish a Policy Statement
legislation and involve EU market outlining our final rules and approach
structures, progress on the follow- to these codes. Our aim is to

7 Paragraph 1.1 of DP16/3: Availability of information in the UK Equity IPO Process.


8 FS17/3 and PS17/22.
9 Fidessa Fragulator data.

37
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

Sector priorities
Investment management

The investment management sector is an important Key issues in this sector include:
poor quality and value for money of
contributor to the UK economy, with just over £8 products, inadequate disclosure and
trillion in total assets under management at the end lack of transparency, susceptibility
of 2016. It has grown steadily in recent years and this to financial crime, and cyber and
technological resilience risks. These
growth is expected to continue. It is important that we issues may cause harms such as
have a competitive sector which is both attractive and investors paying too much for
works well for those who rely on it for their financial products, inappropriate purchases and
products that do not deliver or behave
wellbeing. as expected. Investment management
firms also have responsibilities to
uphold market integrity.

The cumulative impact of important


regulatory changes (e.g. MiFID II
and PRIIPS) can potentially have
wide-ranging and positive impacts
on the sector, in relation to costs,
transparency of fees and governance.
But they may also create prudential
and conduct harms that we will need
to carefully monitor.

In the current low interest-rate


environment, it is even more
important that consumers earn the
most they can from their savings
and investments. The Asset
Management Market Study is a step
in this direction.

The UK’s withdrawal from the EU


presents challenges in this sector.
One important challenge would arise
from any changes to the existing
global regulatory framework that
could make it harder for asset
managers to delegate portfolio
management from the jurisdiction of
the fund to the jurisdiction(s) where
portfolios are managed. We are
gathering intelligence to understand
key changes to firms’ business
models, planning assumptions
and governance after withdrawal.

38
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

Our work will aim to deliver strong brings with it important potential
regulatory cooperation that harms, such as service disruption, loss
supports open markets. of data and exposure to cyber crime. Given that even small
We will engage with firms to ensure differences in charges
they allocate sufficient expertise
Our key activities and resources to these important can have a significant
developments to prevent consumer impact on people’s
Our work in the investment
management sector will aim to
harm and avoid disruption of critical savings over time, the
services. This work will also help to
ensure that firms act as good inform our future strategy with new harm is significant
agents to their investors and as technology. In 2017, we launched the
effective participants in wholesale Asset Management Authorisations
markets. This is especially important Hub to streamline the authorisation
in a continued low interest-rate process for new asset managers
environment that drives a ‘hunt looking to set up in the UK. This is
for yield’ and where technology part of our commitment to efficient
advances rapidly. regulation and enhanced competition.
We will continue to welcome
It is crucial that firms’ decision-making applications throughout 2018.
gives due prominence to customers’
interests. Our ‘five conduct questions’
form the framework we use to assess Asset Management Market Study
the effectiveness of a firm’s culture We estimate that over three-quarters We are implementing a
and governance. Firms also need to of the UK population are exposed to comprehensive remedies package
ensure they have effective systems the asset management sector, either on asset management to tackle the
and controls to avoid being used as directly or through their pensions. It harm we have found by promoting
conduits for financial crime, including is important that competition works increased competition in the
market abuse. well in this market as, for example, interests of investors and to better
even small differences in the charges protect them from the results of
This sector is using new and they pay can have a significant impact weak competition where necessary.
innovative technologies, for example, on people’s savings over time.
distributed ledger technology and In September 2017 we referred
artificial intelligence. Technology investment consulting and fiduciary
has the potential to create real management to the Competition
benefits for both consumers and
firms by increasing competitiveness,
innovation and efficiency. But it also

39
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

and Markets Authority (CMA) for a Liquidity strategy proposal for a new prudential
full market investigation. The CMA regime for investment firms
We have reviewed the feedback
will publish their provisional findings authorised under MiFID. The
from our 2017 discussion paper on
on how competition is working in this proposal is a prudential regime
liquidity management in open-ended
part of the market in summer 2018 for these firms that mitigates the
funds. UK open-ended funds have
and will finalise the investigation potential harm they may cause if
approximately £35 billion invested in
including recommendations for they have insufficient resources
commercial real estate.10 Our paper
remedies by March 2019. to stay financially viable. The aim
looked at the tension from funds
of the review is to formulate more
that offer daily redemption terms,
In 2018/19 we will issue a further proportionate rules for these
while managing assets that are not
Policy Statement on the final rules firms, rather than subject them to a
revalued on a daily basis. It noted the
and guidance outlined in our recently regime primarily intended for banks.
potential harms to investors who
published Consultation Paper. We Over the next year we will provide
are unable to withdraw their money
will also issue a second Consultation technical assistance to the Treasury
or do not receive a fair sale price for
Paper on remedies focused on during the negotiations of the
their assets. We will consult on a
measures to ensure investors proposed text.
package of new rules and guidance
receive clear, comprehensive and
that takes on board the responses
consistent information. We believe that together these
we received, as well as the wider
new and proposed measures will
international agenda, particularly
strengthen the governance of
PRIIPs Regulation the International Organization of
investment managers, helping them
The sector continues to be affected Securities Commission’s updated
to better act in the interests of their
by important regulatory changes ‘Collective Investment Schemes
underlying investors.
that should mitigate actual and (CIS) Liquidity Risk Management
potential harm to investors. Recommendations’ published in
January 2018. Impact of passive investment
The Packaged Retail and Insurance- Given the rapid growth in the
based Investment Products (PRIIPs) Our aim is to ensure that our
proportion of investor wealth
Regulation has applied since January regulatory framework does
managed passively, it is important
2018. It introduced a requirement for not prevent investors having
for us to understand the economic
firms to produce, publish and provide access to diversified investment
implications of this development
a standardised key information opportunities. It should also support
on both individual investors and
document (KID) for PRIIPs. This was the fair treatment of all investors
UK financial markets generally.
so that investors can make better and in these funds and not amplify
By the end of 2018/19, we plan to
fully informed decisions by being able disruptions to the financial system in
publish research that will look at
to compare key features, risks and stressed market conditions.
the rise of passive management in
rewards of PRIIPS, through access to a the UK and will explore the impact
short and consumer-friendly KID. Strengthening governance on core aspects of financial market
performance such as corporate
Alongside the governance remedies
Some firms have told us they governance, market efficiency and
we proposed following the Asset
have concerns about this directly financial stability.
Management Market Study, we are
applicable EU regulation. In
considering whether we should
response, in January we published
extend similar remedies to
a statement clarifying some of our Outcome indicators
with-profits and unit-linked funds.
views on the KID. We will continue
to engage with firms and their trade Following our Asset Management
The SM&CR is being extended to Market Study, we will monitor the
associations to consider how their
cover most of the firms we regulate, market to assess how outcomes
concerns may be resolved so that
including investment managers. We are changing in this sector. Relevant
investors get the full benefits of
give more information on this work information will include measures of
the Regulation.
in the Firms’ culture and governance price clustering and whether firms
chapter. are passing on gains from economies
We will also continue to work with the
European Supervisory Authorities, of scale to their customers. We also
and contribute to the European Investment Firms Review cover governance, technology and
Commission’s post-implementation cyber issues for this sector in our
In December 2017 the EU cross-sector themes.
review of the PRIIPs Regulation.
Commission published a legislative

10 Bank of England Financial Stability Report, July 2016.

40
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

Sector priorities
Retail lending

Many UK households have debts, including a mixture


of both secured and unsecured credit. Credit has an
important economic function and is largely beneficial
for many customers. Yet for the minority who do
experience harm, it can be significant. Our focus is on
the harms caused by poor conduct, particularly when
more vulnerable customers are affected.

The mortgage market is by far the particularly effective in the debt


largest retail lending market in terms management sector, where our
of value, which means that even Authorisation and Supervision teams
relatively isolated misconduct in the have worked closely with
sector can cause significant harm. firms and achieved significant
change. However, we have a number
We aim to ensure that firms sell of concerns, particularly around
products to customers that are the quality of debt advice and the
affordable and suitable for their long-term sustainability of some
circumstances, and take appropriate business models.
action when customers are in
financial difficulty. We expect firms
to put customers’ interests first Our key activities
without focusing on generating
short-term profits. Assessing creditworthiness in
consumer credit
While smaller in value, the consumer
credit market affects many more Following our consultation on
people in the UK and includes a large creditworthiness we will publish a
number of vulnerable customers. Policy Statement on rules which will
The consumer credit market grew by clarify our expectations of firms
10.4% to £198 billion in the 12 months when carrying out creditworthiness
to April 2017.11 While interest rates assessments on their customers.
are expected to remain low, a gradual
increase in interest rates could have Market Study on credit information
a detrimental impact on consumers
who carry high levels of debt. Consumers’ credit information
affects how likely they are to be
Since we took over regulation of able to access a range of financial
consumer credit firms from the services, including mortgages,
Office of Fair Trading in 2014, we loans and credit cards. Credit
have worked to drive up standards reference agencies (CRAs) play an
in the market, including by refusing important role in the provision of
authorisation for firms that do not this information to inform firms’
meet our standards. This has been assessments of credit risk and
affordability. Consumers may

11 Bank of England Statistics - Money and Credit, April 2017


41
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

experience harm if this information Making the mortgage market work


is not shared effectively or is not of better for consumers
good quality through inappropriate
Poor practices by lending decisions or restricted
Our Mortgage Market Study has
debt management access to credit.
looked at whether available tools,
including advice, help mortgage
companies pose a consumers make effective
In our consultation on Assessing
high risk of harm Creditworthiness in Consumer
decisions. It has also examined
to consumers, Credit, we invited views on a range
whether commercial arrangements
between lenders, brokers and other
particularly those of issues in relation to firms’ access
players cause harm to consumers.
to, and use of, credit information
in vulnerable including the coverage, timeliness
We will publish our interim report in
circumstances and consistency of data and
Q2 of 2018, setting out our findings
products provided by CRAs. Building
and inviting views on any potential
on the responses received to our
remedies. We will consider feedback
consultation we intend to launch a
received before publishing our final
market study on credit information
findings, a summary of the feedback
in Q4 2018. We will collect evidence
and our next steps later in 2018/19.
to gain a better understanding of the
potential for harm in this market and,
if necessary, identify remedies. Our Credit-broking remuneration
aim is to ensure that this important models at the point of sale
market works as well as possible to We are currently carrying out
maximise the benefits that it can a thematic review looking at
deliver for consumers. commission and other remuneration
models between credit brokers and
other firms (such as lenders) and
whether they lead to poor customer
outcomes. We are assessing how
inter-firm payments affect which
credit products are offered to
consumers and how they are sold.
We will report our findings towards
the end of 2018.

42
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

Ensuring the debt management Motor finance transfer of regulation, and to report
sector works well to the Treasury by 1 April 2019. We will
The motor finance market grew 8.2%
consider whether the repeal of CCA
Poor practices by debt management in the twelve months to April 201713
provisions would negatively affect
firms pose a high risk of harm to with new point-of-sale lending for
appropriate consumer protection
consumers, particularly those in car purchases totalling £32.6 billion
and whether the provisions could be
vulnerable circumstances. So it is in the twelve months to the end of
replaced by FCA rules or guidance.
important that we have the best Q1 2017.14 Our recently published
We will also take into account whether
possible understanding of how the update explains that we want to
some provisions remain appropriate
market as a whole is working for identify whether consumers have
in today’s market and whether they
consumers. Financial Lives data sufficient, timely and transparent
should be amended or updated. We will
suggest that 3% of UK adults used information when taking out motor
publish an interim report setting out
debt advice or debt management finance. We are testing this in a
our initial views and invite responses.
services in the last twelve months and, number of ways, including through a
of these, 19% used a paid-for service.12 mystery shopping exercise.

Close engagement with the debt We are undertaking further work on Outcome indicators
management sector through our responsible lending, particularly the We will use various sources of
authorisation and supervision work approach taken by motor finance information to see how drivers of
has led to a debt management lenders to assessing creditworthiness harm that lead to unaffordable or
sector with fewer, and more (including affordability). Our work unsuitable product purchase are
regulatory compliant, firms. A will primarily focus on higher changing.
large number of issues still remain credit-risk consumers, but we will
however, particularly around the test how lenders assess affordability We have only regulated consumer
quality of debt advice and the and whether current procedures credit since 2014. Therefore,
long-term sustainability of the are working in the interests of all we will continue to increase our
business model. Our supervision consumers. understanding of issues and improve
function continues to engage closely the evidence on which we base our
with the largest authorised firms We are also doing further work on interventions in this area.
to ensure that they act in the best commission arrangements. Some
interests of consumers. commission structures create a
strong link between the dealer
Last year, we started a thematic commission and the interest rate
review to look at fee-charging charged to consumers. We are
and free-to-customer debt therefore assessing whether lender
management providers to help controls and current regulatory
us build up a full picture of the requirements minimise the potential
sector. This year, we will look at how for harm to consumers.
these providers are meeting their
customers’ needs. We will review We expect to complete our review of
customer files and visit providers the motor finance market by the end
to interview staff and assess their 2018. At that stage, we will publish
processes and how they deal with our findings, setting out any areas of
customers. We will look at both concern we have identified and how
the initial debt advice process we intend to tackle them.
and the continuing service. We
want to understand where there Review of retained CCA provisions
is good practice that helps
consumers manage their debts, Our rules aim to ensure consumers are
as well as identifying areas where adequately protected while not placing
improvement could be made.  We disproportionate burdens on firms. We
expect to complete this review and are required to review the Consumer
report on findings in Q1 2019. Credit Act 1974 (CCA) retained
provisions which were not replaced
with FCA rules or repealed during the

12 FCA Financial Lives survey, 2017


13 FLA Data. The FLA has subsequently stated that the annual rate of growth slowed to 6.0% in the twelve months to December 2017.
14 FLA Data. New POS lending to consumers for car purchases in the twelve months to December 2017 totalled £34.2 billion.

43
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

Sector priorities
Pensions and retirement income

We want to ensure that consumers are equipped to The decisions consumers make
during their working life about saving
make good decisions to fund their retirement, such for retirement will influence their
as through appropriate advice or guidance, and can financial wellbeing in later life. The
access good quality, value-for-money retirement subsequent decisions they make on
how to take their retirement savings
products. We also want to ensure consumers know are also hugely significant. Yet many
how to avoid pension scams and poor deals. The consumers feel unequipped to make
number of consumers contributing to workplace these decisions confidently. 15
pensions continues to grow, driven in large part by The market has been adapting to
auto-enrolment. In the first quarter of 2016, 68% of all changes from the Government’s
employees were enrolled in a pension, equating to 78% pension freedom reforms in 2015.
Our regulation of the market has
of all eligible employees.15 focused on making adjustments to
our rules to support the reforms. We
have continued to see a shift away
from consumers using annuities
to purchase a guaranteed income
towards drawdown products that
offer greater flexibility.16 Drawdown
products attracted inflows of
approximately £16.2 billion in 2016
versus £4.6 billion for annuities.17

Our key activities


We also cover our work on Pensions
and retirement income, such as our
Retirement Outcomes Review, in
our Long-term savings, pensions
and intergenerational cross-sector
chapter.

Pensions strategy
This year our focus is on producing a
clear strategy that makes it easier for
all our stakeholders to understand
our role in the pensions sector. We
are working closely with The Pensions
Regulator to produce a joint Pensions
Strategy which will set out how we

15 ONS, Annual Survey of Hours and Earnings 2016. ONS, Workplace Pension Participation and Savings Trends of Eligible Savers Official Statistics: 2006 to 2016.
16 FCA, Product Sales Data 2016.
17 FCA, retirement income data 2016.

44
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

will work together to tackle the key Helping consumers avoid scams Outcome indicators
regulatory risks facing the pensions
Where appropriate, we take robust We use a variety of data to assess
sector in the next 5-10 years. This
action against scammers both harm in this sector. These include
will be informed both by our own
to stop them and deter others. how many consumers shop around
research and views from other key
Alongside our ScamSmart work for drawdown products, how much
stakeholders, including the outcome
(covered in Financial crime and AML), they understand about their options
of the House of Commons Work and
we continue to monitor, quantify and and the number of products that
Pensions Select Committee’s inquiry
tackle cases of systemic pension are fully cashed-in. Working with the
into the pension freedoms. We will
mis-selling and fraud. This involves DWP, we can use charges to assess
jointly host a series of stakeholder
firms we regulate and unregulated the cost of workplace pensions and
events and a webinar with The
firms that introduce business to how that may harm consumers. Our
Pensions Regulator to ensure that all
them. We also work with firms to workstream on assessing suitability
relevant issues are covered.
ensure they take the necessary enables us to measure whether
steps to protect consumers and customers are making unsuitable
Potential extension of the remit collaborate with other agencies purchases or choices due to
of Independent Governance to tackle scams. We will continue unsuitable advice.
Committees for workplace pension to work with the Treasury and
schemes Department for Work and Pensions
on legislative measures to combat
We are currently undertaking
pension scams, including a ban on
wider policy work on Independent
pension cold calling.
Governance Committees (IGCs) We take robust action
for workplace pension schemes to
look at the possibility of extending
against scammers
their remit. This wider work includes both to stop them and
possible changes to the rules for IGCs deter others
to improve governance and value
for money for consumers, following
recommendations on social investing
from the Law Commission.

45
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

Sector priorities
Retail investments

Where consumers decide to take advice on investments they need


to know that it is suitable for their needs, consistent with their
approach to risk and that they are not being overcharged. Advisers
must be appropriately incentivised when recommending products
to their customers, and the distribution chain should be free from
conflicts of interest. This is increasingly important as, following the
introduction of the pension freedoms, many consumers now face
complex financial choices.

Our Assessing Suitability Review and accessible financial advice and


found that 93% of advice was suitable guidance, including streamlined
for consumer needs. These are advice on specific investment needs.
positive results for the sector and We will review the impact of FAMR
reflect the successful adoption of the and the RDR in 2019.
Retail Distribution Review (RDR)
by advisers. Technological developments in
the advice market, through ‘robo’
Our strategy for supervising the or automated advice models, are
quality of retail investment advice offering consumers new ways to
is twofold. First, we aim to improve access investments. These can
standards across the market and potentially lower the cost of advice
periodically assess this. Second, we and so extend it to those who
focus on specific areas where advice currently decide it is unaffordable.
is less suitable, including high-risk We are carrying out a review of
investments and pension transfers. robo-advice models across a number
of firms and our Advice Unit is
providing individual feedback to firms
Our key activities developing these models.

Financial Advice Market Review High-risk and complex


(FAMR) investments
FAMR made recommendations to High-risk investments are
improve access to financial advice, characterised by unusual, speculative
in part by seeking to lower costs or complex product structures,
and increase the availability of investment strategies or terms and
automated advice for consumers. features. As consumers look for better
FAMR recommendations also sought returns, some are buying products
to create market conditions that which are unlikely to meet their savings
allowed firms to deliver affordable or investment needs.

46
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

In 2018/19 we will carry out a consumer (D2C) platforms and share Review, the number of consumers
programme of work to tackle dealing services currently administer who report mis-selling, consumer
incidences of consumers entering £170 billion of assets. The assets perceptions of quality, price and
into high-risk investments which under administration in both the value, and reports of problems in
are unsuitable for their needs. This D2C and adviser platform market accessing appropriate advice.
work will enable us to identify where grew rapidly in 2016, by 15% and 18%
there are problems with high-risk respectively.18 Our market study is
investments. We will also strengthen looking at how platforms compete
our authorisations gateway and and their impact on the overall
supervision for firms that provide charges investors pay for their retail
advice on high-risk and complex investment products. We will publish
investments. This will ensure they our interim report in summer 2018,
improve their disclosure and reduce setting out any problems we see in
the risks of harm to retail investors. the market and any action we intend
to take to tackle them.
Contracts for Difference
The report will cover the tools that
As part of our programme of work platforms use to help consumers
we continue to mitigate harm make informed investment decisions
from firms selling Contracts for and evaluate the value for money of
Difference (CFDs) and spread bets investing through a platform. It will
to retail consumers who often do consider the ‘model’ portfolios and
not understand the risks of these diagnose whether consumers can
complex, leveraged instruments. understand what these portfolios
We are also focused on binary offer. The report will look at how
options, which entered our regime platforms promote the products
from January 2018. Our work they offer and how this affects
involves a coordinated programme consumer choice. We will also assess
of policy and supervisory activity. what impact these relationships are
In 2018, we will evaluate how well having on competition.
our interventions have worked and
act where firms fail to meet our
Raising awareness of fraud
expectations.
and scams
We support the European Securities We have a duty to protect
and Markets Authority’s (ESMA) consumers from becoming victims
agreed EU-wide temporary product of scams and fraud. We note an Younger consumers are
intervention measures announced increase in fraudulent investment at increased risk of online
27 March 2018. These include firms that are advertising online
the prohibition of the marketing, and on social media – for example, investment fraud, which
distribution or sale of binary offering trades in binary options. has now overtaken the
options to retail clients and a range Younger consumers are at increased telephone as the most
of restrictions on the marketing, risk of online investment fraud, which
distribution or sale of CFDs to retail has now overtaken the telephone as common contact method
clients, including rolling spot forex. the most common contact method for investment fraudsters
We expect to consult on whether for investment fraudsters. We cover
to apply the ESMA measures on a our work in this area in the earlier
permanent basis to firms offering section on Financial Crime (fraud and
CFDs and binary options to retail scams) and anti-money laundering.
clients.

Investment platforms Outcome indicators


market study We use a range of factors when
The assets administered by analysing the suitability of products
investment platforms continue to and advice. These include findings
grow at a significant rate. Direct-to- from our Assessing Suitability

18 Platforum – UK D2C Guide, February 2017.


47
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

Sector priorities
Retail banking

Retail banking is central to the lives of virtually The last two years have seen major
regulatory changes to retail banking
every consumer, business and organisation in the to improve competition; many of
UK, and the way customers use it is constantly these are continuing. Our focus on
evolving. Technology and innovation now drive implementing these changes is on
tackling the main harms they are
customers’ expectations of how they run their finances designed to resolve. These harms
and how they make and receive payments. These range from poor value and service,
changes will profoundly shape the size and nature of the high charges and theft of customers’
data and money through cyber
market over the next decade. attack and fraud.

The Payment Services Directive


(PSD 2) will promote competition
by opening up third-party service
providers’ access to banking
customers’ account data. This may
increase the opportunities available
from using big data and advanced
analytics, creating potential for new
types of businesses that did not
previously exist.

Our key activities


Helping firms prepare for
ring-fencing
Banks undertaking ring-fencing
should have appropriate
data security controls and,
where applicable, outsourcing
arrangements to prevent customers
and the retail banking market
suffering harm. Ring-fencing
rules must be implemented by 1
January 2019. We will check that all
affected firms are managing risks
effectively and review firms’ IT plans
as mentioned in our Data security,
resilience and outsourcing chapter.

These rules will increase the


protections of essential banking
services used by ordinary depositors.
Current accounts, savings accounts
and payments will no longer be put

48
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

at risk by a failure in another part of will ensure we identify and deliver a


the business, such as investment proportionate response to any harm
banking. After implementation, to consumers or markets, and ensure
we will review the effectiveness of firms comply with the Regulations.
PSD2 will promote
governance arrangements through competition by opening
our regular supervisory interactions PSD2 is also designed to improve up third party service
with firms. consumer protection and give
consumers a quicker and more
providers’ access to
streamlined service when making banking customers’
Developing a payments
sector strategy
or receiving payments. Regulatory account data
Technical Standards on strong
The payments sector is customer authentication and secure
experiencing technological, communication (the ‘SCARTS’) has
strategic and regulatory change been published as a Commission
which is transforming the Delegated Regulation in the Official
traditional payments value chain. Journal of the European Union.
We are working to improve our These are key to achieving enhanced
understanding of the payments consumer protection, promoting
system by identifying the key players innovation and improving the
and current and emerging trends security of payment services.
that may cause harm in future.
Payment Protection Insurance
We will undertake diagnostic work on
redress (PPI)
payment fraud, including Authorised
Push Payment Fraud, to develop Our PPI deadline awareness
appropriate interventions as well as campaign will continue to run
support industry initiatives. We will throughout 2018/19 up until the
use evidence sent to the Payments deadline of 29 August 2019. The
Systems Regulator by the consumer campaign aims to raise awareness
group Which? to help inform this work. of the deadline date and prompt
all those who intend to complain
The Bank of England has committed to do so. We continue to monitor
to opening up direct access to its our performance and optimise our
Real-Time Gross Settlement (RTGS) approach so that the campaign
system to non-bank Payment effectively delivers its objectives.
Service Providers. This will give Before the end of year we will publish
electronic money institutions and an interim report giving findings on
payment institutions direct access the performance of our campaign
to payment schemes. We are and our key supervisory reviews
strengthening our supervision of all of, and interventions in, firms’
applicants to support this initiative treatment of consumers.
which will help improve competition
and innovation in payments.
Outcome indicators
Delivering the revised Payment To measure whether competition
Services Directive (PSD2) is improving, we look at how easy
PSD2 has brought two service customers find it to compare
providers, Account Information products across providers and
Service Providers and Payment industry data on how many of them
Initiation Service Providers, have switched accounts as a result.
under our regulation for the first We also monitor how many people
time. These services could help complain about barriers to accessing
consumers manage their finances financial products and, if they have
better and more conveniently. been rejected for a product or
service, identify why. We also look
We will supervise these providers at whether firms are meeting our
and develop our understanding of requirements to publish information
the emerging business models. This about current accounts.
49
Chapter 5 Financial Conduct Authority
Sector priorities Business Plan 2018/19

Sector priorities
General insurance and protection

General insurance and protection products One of the most significant


regulatory changes in 2018/19 will be
allow both individuals and businesses to protect the implementation of the Insurance
themselves against uncertainty, enabling a Distribution Directive (IDD) which
wide range of economic activity that might comes into force on 1 October 2018.
The IDD will help reduce conflicts
otherwise be seen as too risky. It has a central of interest and ensure firms act in
role in enabling activity in industries such as consumers’ best interests. We will
construction, agriculture, manufacturing, leisure work with firms to ensure that they
comply with our rules set out in our
and professional services. So it is vital this market, Policy Statement.
including the wholesale market underpinning
it, works well and keeps adapting to meet new Our priorities are fairness, access
and value for retail customers, and
needs and changing circumstances. an effectively functioning wholesale
market. Within this sector, the key
drivers of harm include suitability of
products, renewal pricing, mis-selling,
low value products, operational
resilience and cyber-crime. Our work
to understand firms’ pricing practices
is covered in our treatment of existing
customers chapter.

Our key activities


Publishing our interim findings on
wholesale insurance brokers
There have been significant changes
in the wholesale insurance sector
in recent years which has seen
brokers developing new services
and business practices. Given these
changes, we are exploring how well
competition is currently working and
whether it could work better in the
interests of clients.

In 2017 we began a market study to


assess whether brokers use their
bargaining power to get clients a
good deal, if any conflicts of interest
exist and how broker conduct affects
competition.

50
Financial Conduct Authority Chapter 5
Business Plan 2018/19 Sector priorities

We aim to publish our interim findings Product design and oversight


from the market study by the end
The IDD should reduce the risk that
of 2018. This report will set out our
analysis and preliminary conclusions,
firms will sell unsuitable products We will look into
and any potential solutions to address
to consumers. It requires firms the end-to-end
to identify the target audience
identified concerns.
for products to ensure they are relationships
designed to meet these consumers’ in a sample of
Value in general insurance needs, and regularly review these general insurance
distribution chains products to ensure they continue
to do so. distribution chains
In 2018/19 we will conclude the
first phase of our diagnostic work
on value in the distribution chain. Keeping our rules on GAP insurance
This has looked at three insurance under review
products – tradesman insurance,
Our Mission explains how we
travel insurance and motor ancillary
continually assess the impact
insurances, including Guaranteed
our rules and guidance have on
Asset Protection (GAP) insurance.
consumers, firms and markets.
This follows our thematic reviews of
In 2018/19 we will evaluate the
delegated authority and appointed
effectiveness of our 2015 rules on
representatives, which showed that
GAP insurance to assess if they
the value of insurance products and
are improving competition and
related services could be eroded
increasing consumer understanding.
through the distribution chain.

We will look into the end-to-end


relationships in a sample of distribution Outcome indicators
chains. This will enable us to identify We use a mixture of data to help us
how the amounts customers pay understand the drivers of harms
divides up between the various parties in this sector, including sales data,
and how different distribution chains pricing trends and consumer surveys.
can affect the value of insurance In addition, we consider operational
product customer services. We will resilience and cyber-crime within our
report our findings and set out any cross-sector themes.
next steps in the second half of 2018.

Protecting vulnerable consumers


Our ‘Future Approach to Consumers’
shows how different consumers
can become vulnerable at different
times in their lives and the need for
firms to adapt to these changing
circumstances. In summer 2018, we
will publish our Feedback Statement
from our Call for Input on Access to
Travel Insurance, which looked at
the challenges for firms and
consumers in providing and accessing
fairly-priced cover for people with
pre-existing medical conditions. We
want to understand the market and
consumers’ journeys better and use
this as an opportunity for industry,
regulators and consumer groups to
work together to produce meaningful
change for vulnerable consumers.

51
52
Financial Conduct Authority Section 6
Business Plan 2018/19 How we operate

How we operate

This section provides details on our operational


activities and our finances.

Our budget Annual Funding Requirement (AFR)


Our annual budget reflects the cost of the Our AFR for 2018/19 is £543.9m, an
resources we need to carry out our work increase of 3.2%. Our AFR includes our
in 2018/19. ORA budget costs, the costs we need
to recover for changes to our regulated
The key elements of our budget are: activities (Scope Change) and EU
Withdrawal. The actual fees we collect will
• the cost of our core operating activities reflect the AFR net of rebates related to
(our Ongoing Regulatory Activity, ORA), financial penalties collected (estimated at
the largest element of which is our people £48.2m).

• the total amount we charge the industry


to fund our activities (our Annual Funding
Requirement)

• capital expenditure for the development


of our technology and information
systems and new regulatory and
operational requirements

Annual Funding Requirement (AFR)

FCA Budget
 
£m 2017/18 2018/19 Change % Change

Base ORA Budget 508.0 523.2 15.2 3.0%

Payments Department 2.0 2.0

OPBAS Department 2.0 2.0

Total ORA Budget 508.0 527.2 19.2 3.8%

EU Withdrawal 2.5 5.0 2.5 100.0%

Scope Change Recovery (incl. OPBAS) 16.4 16.7 0.3 1.8%

ORA Reserves Utilised -5.0 -5.0

Total AFR 526.9 543.9 17.0 3.2%

53
Chapter 6 Financial Conduct Authority
How we operate Business Plan 2018/19

The ORA Budget EU Withdrawal


We are committed to delivering an EU Withdrawal £m
ORA budget that is flat in real terms,
subject to any changes in our wider ORA spend on EU withdrawal 14
ongoing regulatory responsibilities. EU withdrawal fee 5
Our 2018/19 budget reflects the
ORA reserves utilised 5
following changes in the scope of our
work: Firm specific costs 6
Total EU Withdrawal cost 30
• Additional regulatory responsibilities
around payments following the
introduction of PSD2. We have identified total EU
withdrawal demand of around £30m.
• The formation of the Office for We will absorb £14m of this within
Professional Body Anti-Money the ORA budget by reprioritising;
Laundering Supervision (OPBAS), delaying or reducing non-critical
with £0.3m of set up costs reflected activity and finding more effective
in Scope Change recovery. ways to deliver our regulatory
requirements.
Before taking these into account and
after utilising £5.0m of ORA reserves This leaves a requirement for funding
to mitigate the impact on fee payers, for the remaining £16m for EU
our budget, excluding EU Withdrawal withdrawal activity. We will raise £5m
and Scope Change, increases by of this through the fees we charge
£10.2m to £518.2m, an increase of firms, with a focus on the firms that
2% which is below the current rate of are most likely to be affected by EU
inflation.
2018/19 ORA Budget £m withdrawal. This is consistent with
our approach to raising additional
(24.3)
14.0 9.6 to invest in our people
We continue EU withdrawal funding in 2017/18. A
21.8
to ensure we deliver on our ongoing further £5m will be funded through
7.3 342.6 using ORA reserves. The remaining
objectives while preparing for EU
Withdrawal. It is vital that we attract £6m will be funded from specific
and retain the right people, and that firms in the same manner as Scope
38.3 Change, where we will recover
we have robust operational functions
that support
37.0our key regulatory the costs of implementing new
functions. The chart below reflects regulatory responsibilities, such
how our ORA budget will be spent in as passporting and on-shoring
2018/19. credit rating agencies and trade
repositories, once we know the final
80.9 costs and number of firms’ affected.
2018/19 ORA Budget £m
There is still considerable
2018/19 ORA Budget £m
uncertainty about the scale and
(24.3) Sta� costs
14.0 9.6 timing of various activities in
21.8 IS Costs connection with EU withdrawal. We
7.3 342.6 will closely monitor the progress of
Depreciation negotiations and the potential for
any further impact on our cost base.
38.3 Accommodation and o�ce services
37.0 Scope change recovery
Enforcement case costs
In 2018/19 we will recover scope
Professional Fees change costs for MiFID II, Consumer
Credit and OPBAS. Consumer credit
Training, recruitment and travel firms were not billed for the full costs
80.9
of regulation during the setup and
Printing, publications and other transition period of the FCA taking
over their regulation from the Office
Sta� costs Sundry income of Fair Trading. We will continue to
54
IS Costs
Financial Conduct Authority Chapter 6
Business Plan 2018/19 How we operate

Value for money


2017/18 2018/19
Capital Expenditure £m £m Value for money (VFM) is central to
IT Systems Development & 41.6 50.1 Our Mission; we continue to focus on
Infrastructure the best use of resources to reduce
harms and achieve our objectives.
Property, plant & equipment 1.0 1.0 This includes a range of actions and
Total Capital Excluding TIQ 42.6 51.1 activities to ensure we operate in the
most efficient and economical way.
TIQ (Stratford Property)* 70.0 10.0
Total Budget 112.6 61.1 Our prioritisation processes and
decision-making framework enable
* Note 2017/18 Stratford Property budget restated to align with the most up to date phasing
estimate of capital expenditure for the multi – year programme. us to prioritise and make best
use of our resources. Our three-
recover the outstanding deficit over a period for 8 months are forecast to tier performance measurement
ten year period at £6.2m per annum. total £20m and will be funded from framework enables us to measure the
our retained ORA reserves. efficiency of our approach.
Capital expenditure
Our new building has been designed Maintaining a robust authorisation
Our capital expenditure budget with sustainability in mind. It features process and proactive and efficient
increase (excluding our move to innovative heating and cooling supervision, competition and
Stratford) reflects the ongoing systems that are fully integrated enforcement regimes remain
investment and maintenance of to reduce heating costs and essential features of our regulatory
IT systems and infrastructure environmental impact. model. Our approach will continue to
development, as well as evolve, making them more efficient
implementing the necessary IT The building has qualified for and proportionate.
change driven by legislation and EU Building Research Establishment
Withdrawal. Capital expenditure Environmental Assessment Method We recognise that being efficient
is largely funded through the ORA (BREEAM) Excellent. The Excellent with our resources also includes how
depreciation charge. rating is awarded only to the top 10% we make the best use of the data and
of new non-domestic buildings. information available to us. We have
a number projects in train to improve
Move to Stratford
our ability to manage and analyse our
Payment Systems Regulator
On expiry of our current leases in data to identify potential harms and
Canary Wharf we, along with the The Payment Systems Regulator deliver our regulatory outcomes.
Payment Systems Regulator (PSR), (PSR) is a separate legal entity based
are moving to Stratford. We expect at the FCA, with its own board and From an operational perspective
to complete the move by summer statutory objectives. Details of its our move to Stratford will provide us
2018. The new site, in Endeavour funding can be found in the PSR’s with an opportunity to improve ways
Square, Stratford, provides a modern Annual Plan. As an independently of working with greater flexibility to
and fit-for-purpose office, updated accountable subsidiary of the FCA, work across functions and to share
facilities and the infrastructure and the PSR continues to utilise the FCA’s knowledge more efficiently. We
technology to meet our future needs. operational support for services such are delivering more cost-effective
One of the aims of introducing our as human resources, finance and technology solutions such as
new technology is to reduce our information services where it is viable, the move of our data centres to
reliance on printing and paper. effective and efficient to do so. cloud-based technology.

We have signed an Agreement for In 2018/19, we will continue to work Finally, underpinning all of this we are
Lease for 20 years to move to the collaboratively with the PSR to continuing to embed the concepts
new site. We are incurring costs to carry on developing interventions to of VFM and how we can apply
get the building ready for occupation reduce harm to consumers from them in practice through a training
and the current intention is that these Authorised Push Payment scams. programme and support network
will be funded by external financing, We worked closely with the PSR on its of subject matter experts. We are
the costs of which will be recovered response to the Which? super further developing our approach
against the rent-free period. complaint in December 2016, on its to continuous improvement
report and consultation published in throughout all areas of our work and
Dual running costs for operating both November 2017. we continue to work closely with the
our Canary Wharf estate and our new National Audit Office to maintain an
site in Stratford during the transition effective relationship.

55
Chapter 6 Financial Conduct Authority
How we operate Business Plan 2018/19

Our people the Future and Advanced Manager Our Chief Executive is a member
Programmes, investing in our future of the Financial Policy Committee
Our People Strategy reflects our
leadership and helping balance our (FPC). The FPC identifies, monitors
Mission:
people’s technical expertise with and acts to remove or reduce
the best people and operational systemic risks with the aim of
• our new ‘At our best’ values will
management skills. protecting and enhancing the UK
directly support embedding the our
financial system’s resilience. We
Mission and reinforcing the right
closely monitor risk to financial
behaviours across the organisation Corporate responsibility
stability and work closely with the
We are proud of the fact that 39% Bank of England on areas of interest
• a refreshed Leadership Framework,
of our staff volunteered for a range to the FPC, such as market liquidity.
including clear responsibilities
of initiatives, against a target of
and accountabilities under our
30%. Our current initiatives are We work closely with the Treasury,
application of the SM&CR, ensures
diverse and engage people at all the Competition and Markets
that our leaders know what is
levels and in a variety of teams Authority , The Pensions Regulator,
expected of them and their role in
across the organisation.  We the Financial Ombudsman Service,
the organisation
are also a London Living Wage the Money Advice Service , the
employer and incorporate corporate Financial Services Compensation
• a forward-looking strategic
responsibility requirements into our Scheme, the Prudential Regulation
Employee Capability Plan tells us
supplier relationships through the Authority and the Bank of England,
what capabilities we will need in the
procurement process.  other government agencies and
future and helps us ensure these are
in place departments, and international
To build on our move to Stratford, regulatory organisations to provide
We are building a diverse and and after extensive research evidence and input to advance
inclusive place to work, both and engagement with the local our objectives.
because we want our people to be community, we have agreed a new
themselves and because diversity community programme which
makes us a more effective regulator. will focus on year seven students FCA statutory panels
To demonstrate our commitment (those in the first year of secondary
education). We are now working with We are required to consult on
to diversity and inclusion, we are the impact of our work with
actively working towards the target schools and community partners to
develop the programme, ready for four statutory panels. These
we set in 2016 for 45% of our senior panels represent the interests of
leadership team to identify as female our move to Newham in 2018.
consumers, practitioners, smaller
by 2020, and 50% by 2025, in addition regulated firms and markets. We also
to our target for 8% of our senior Working with others consult with the Listing Authority
leadership to identify as Black, Asian Advisory Panel.
In addition to our ‘Approach to’
and Minority Ethnic (BAME) by 2020,
documents, we have a central role in
and 13% by 2025. These panels play an important role
developing and delivering key policy
initiatives, often in collaboration with in both advising and challenging us,
As well as building a diverse workforce and bring a depth of experience,
other regulators. We also monitor
with a broad range of skills, we also support and expertise in identifying
and respond to issues around our
need to think strategically across risks to the market and consumers.
regulatory remit.
all of our people-related activities We consider their views when we
to achieve the organisational and develop our policies and decide
We help influence domestic
behavioural changes to deliver and implement other regulatory
and international initiatives and
our Mission. interventions. The Panels are:
legislation. We actively engage with a
wide range of global bodies, to shape
We continue to develop our people • The Consumer Panel
policy debates, ensure effective
to achieve their potential and to
cross-border cooperation, share
keep our best talent. As well as our • The Practitioner Panel
regulatory experience and help
rolling programme of events to keep
identify new and emerging issues.
our staff up to date with economic • The Smaller Business Practitioner
Many countries see our initiatives, for
and market developments, we will Panel
example FCA Innovate, as industry-
expand our successful secondment
leading and we collaborate with
programme to include a wider range • The Markets Practitioner Panel
international regulators to promote
of regulated firms and consumer
innovation in our respective markets.
organisations. We will also strengthen • The Listing Authority Advisory Panel
our management framework through

56
Financial Conduct Authority Chapter 6
Business Plan 2018/19 How we operate

57
Annex 1 Financial Conduct Authority
Update on Business Plan 2018/19
market-based activity

Annex 1: Update on market-based activity

Firms’ culture and governance Publication type Timings


*Establishing a public register Consultation Paper Q2 2018/19
Accountability Policy Statement Q2 2018/19
     
Innovation, big data, technology and competition Publication type Timings
Assessment report in
*Review of Cryptocurrencies Q2 2018/19
conjunction with HMT and BoE

     
Treatment of existing customers Publication type Timings

Providing SMEs access to FOS Policy Statement Q2 2018/19

     
Pensions and retirement income Publication type Timings
Retirement Outcomes Review Final report and Q2 2018/19
Consultation Paper
Non-workplace pensions Feedback Statement Q3 2018/19
Fair treatment of with-profits customers Q3 2018/19
*Unsuitable pension transfer advice Policy Statement Q3 2018/19
*Savings adequacy Occasional Paper Q4 2018/19
 
Retail Banking Publication type Timings
Strategic Review of Retail Banking Business Models Consultation Paper Q3 2018/19
Improving competition in current accounts Policy Statement Q3 2018/19
   
Financial crime Publication type Timings
Financial crime review of e-money  Report Q2 2018/19
     
General Insurance and protection Publication type Timings
Wholesale Insurance Brokers Market Study Interim report Q3 2018/19
Value in the distribution chain (Phase 1)   Q2 2018/19
*Assessing claims inflation in General Insurance   Q4 2018/19

* New projects
58
Financial Conduct Authority Annex 1
Business Plan 2018/19 Update on
market-based activity

Retail Investments Publication type Timings


Investment Platforms Market Study Interim Report Q2 2018/19
Outcomes testing on auto advice   Q4 2018/19
High-Risk Complex Investments   Q3 2018/19
     
Investment Management Publication type Timings
Asset Management Market Study remedies Policy Statement Q4 2018/19
     
Mortgages and mutuals Publication type Timings
Mortgages Market Study Interim report Q1 2018/19
     
Consumer credit Publication type Timings
Motor finance Final Report Q3 2018/19
Consumer Credit Act retained provisions review Consultation Paper Q4 2018/19
Debt Management Sector Review   Q4 2018/19
*Market Study On Credit Information  Terms of Reference Q4 2018/19
High-Cost Credit Review Consultation Paper Q4 2018/19
Policy Statement
     
Wholesale financial markets Publication type Timings
LIBOR Transition   2020/2021
Implementation of the EU Benchmark Regulation Policy Statement Q1 2018/19
Reforms to the listing regime Consultation Paper Q2 2018/19
*Money Laundering in Capital Markets Report Q1 2019/20
*Approach to Market Integrity Report for Consultation Q4 2018/19

* New projects
59
Annex 2 Financial Conduct Authority
FCA organisational chart Business Plan 2018/19

Annex 2: FCA organisational chart

Committees of the Board


External Risk & Strategy,
Audit, Remuneration,
Nominations, Oversight, Payment Systems
Regulatory Decisions, Regulator (PSR) is a wholly
Competition Decisions owned subsidiary of the FCA

FCA Board
Corporate Services
Chair

General Counsel’s Division


Internal Audit

Chief Executive Officer

Risk & Compliance


Oversight

Supervision –
Supervision Enforcement
Strategy & Investment,
– Retail & & Market Operations International
Competition Wholesale &
Authorisations Oversight
Specialists

Executive Committee

60
© Financial Conduct Authority 2018
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Telephone: +44 (0)20 7066 1000
Website: www.fca.org.uk
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