The Financial Conduct Authority (FCA) has laid out its business priorities for the year ahead, admitting that one effect of the Coronavirus crisis will be the acceleration of digitisation within financial services.
“We have seen greater digitisation of the firms we regulate, and we can expect the social changes driven by Coronavirus to accelerate the development of digital markets,” read the Business Plan for 2020/21.
“We need to ensure we have the necessary skills and focus to supervise firms effectively in an age of Big Data, but also harness the benefits for consumers through our own and firms’ use of this data.”
The FCA continued that it also needs to be aware of the potential disproportionate impact on vulnerable consumers, some of whom may be among the ‘digitally disenfranchised’.
The regulator stated that firms should use data and algorithms ethically to price and have adequate controls to prevent undue bias or discrimination.
As for its own work, the FCA stated that it is investing in systems and processes to work more efficiently and make better use of its sources of information.
“Our Data Strategy, in particular, will harness the power of data and help us understand markets and consumers better,” the document read. “More effective use of information and intelligence will allow us to identify harm and remove it more quickly when we see it – it will also reduce the regulatory burden on firms.”
Data and regulatory returns will be streamlined through Digital Regulatory Reporting, while operational impact on firms will be lessened through better coordination between regulators.
“We will deepen our engagement with industry and society on artificial intelligence, specifically machine learning, and focus on how to enable safe, appropriate and ethical use of new technologies,” the FCA stated. “We will strengthen our rules to prevent money laundering, as well as working with domestic and international stakeholders to support a joined-up approach to cryptoassets.”
The existing Gabriel system will be replaced with a new platform for collecting firms’ data, to provide an improved user experience, including a single identity log on with the Connect system.
"Following our Viability Assessment we, along with the Bank of England, the FCA will take forward work on Digital Regulatory Reporting," it read.
It also promised to maintain international collaboration through the Global Financial Innovation Network, including seeking to facilitate international sandbox experiments and deepening international knowledge-sharing of innovation approaches and new market trends.
“We will explore if and how to expand our sandbox services to foster and encourage the wider adoption of appropriate technologies, particularly for RegTech,” the document added.
In terms of sector work, within retail banking, the FCA stated that it wants firms to build greater resilience to economic crime through sustainable improvement in their systems and controls so that they can spot, disrupt and stop these activities.
Within investment management, the FCA said it is exploring further what effective disclosure looks like in supporting consumer investment decisions. "We continue to prioritise effective governance and expect firms to implement the Senior Managers & Certification Regime properly to help deliver this,” the document stated.
As for wider Coronavirus support, the FCA committed itself to:
• protect the most vulnerable – ensuring that they can get the financial services and the help they need;
• tackle scams – helping consumers avoid the scams that spring up as the pandemic develops;
• ensure fair treatment for consumers and small firms - making sure that firms give strong and clear support to customers, recognising challenges that everyone is facing;
• keep markets working well – ensuring that markets remain orderly; and
• mitigate firm failures – mitigating the impact on consumers where firms fail in these challenging circumstances.
FCA interim chief executive Chris Woolard said: “In a matter of weeks, Coronavirus has altered the UK’s financial landscape dramatically.
“At times like this it is more important than ever that the FCA leads the way on the protection of consumers, firms and the markets.”
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