Businesses operating across the financial services sector have been given an insight into upcoming changes in regulation being considered by multiple UK authorities and should take the opportunity to engage and help shape the changes coming, an expert in financial services regulation has said.
Elizabeth Budd of Pinsent Masons was commenting after a new regulatory initiatives grid (80-page / 945KB PDF) was published on Monday.
The grid anticipates significant reforms across the different sub-sectors of financial services, impacting banks and insurers, asset managers, payment providers, fintech companies and pension scheme providers, among other firms.
Changes to banks’ capital requirements, insurance and payments regulation, sustainability reporting requirements, firms’ duties around cybersecurity and incident reporting and the UK’s funds regime, as well as the open banking framework, are among the initiatives trailed.
Budd said: “The grid highlights the ongoing cooperation between different regulators and authorities, notwithstanding their independent remits, as well as the ongoing reform to the legislative and regulatory frameworks. Whilst the authorities consider many of the initiatives to be ‘low impact’ on firms, an acid test for the measures – given the government’s growth agenda and growth remits provided to the authorities – will be whether they make the UK a more attractive place to do business.”
“On the ‘high impact’ initiatives, many of these are already well in train with consultation ongoing across a wide number of topics, ranging from how stablecoin and crypto should be regulated, to reforms in wholesale markets, capital adequacy and stress testing. The FCA in particular is using its newly awarded powers to push forward with reform, and firms should engage now to ensure that they contribute to the direction of travel,” she said.
James Hay of Pinsent Masons, an adviser on climate and sustainability matters, said the grid provided important updates on a variety of ESG-related initiatives.
He highlighted, for example, how businesses can expect the UK government to open a consultation before the end of June regarding implementation of global standards regarding sustainability disclosure, which were published by the International Sustainability Standards Board (ISSB) in 2023. This will then be followed by an FCA consultation on disclosure requirements for UK listed companies before the end of September.
The government is also due to consult before the end of June on how to mandate listed companies and financial institutions to develop and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement – in line with its manifesto commitment made prior to coming to power last summer. Like with the sustainability reporting initiative, the FCA plans to then open a consultation in July, August or September “on strengthening its expectations for listed issuers’ transition plan disclosures”. The FCA’s regime will be based on a disclosure framework developed by the UK’s Transition Plan Taskforce.
Providing ESG ratings will also become a new regulated activity. According to the grid, the government intends to make secondary legislation widening the regulatory perimeter to bring ESG ratings providers in-scope of FCA regulation. The FCA then plans to consult on proposals for the future regulatory regime.
The FCA has, however, not put a timeline on extending its sustainability disclosure and investment labelling regime to providers of portfolio management services, which it consulted on doing last year.
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