Reducing the burden

The end of July saw the first anniversary of the implementation of the FCA’s Consumer Duty. This meant vast amounts of work undertaken by regulated firms to prepare, looking to embed the Duty in every stage of the customer journey.  We have supported CCTA members through this process, but it is no means finished, as we know this will be a continual process, especially as requirements for closed products and the Annual Board Report have now come into force too.

There is no doubt that the introduction of the Duty has meant extra regulatory requirements which come at a cost. These additional costs can particularly hit small firms, and we know there is more to come with the introduction of the new Product Sales Data requirements next year, for example.

For this reason, it was good to see the FCA launch a call for input last week, focused on looking to simplify its retail conduct rules and guidance. The regulator is particularly keen to address potential areas of complexity, duplication, confusion, or over-prescription, which create regulatory costs with limited or no consumer benefit.

They have also said that they want to include appropriate flexibility in the rules to be responsive to future changes and innovation.

The FCA wants to hear from firms on issues including:

• which detailed rules or guidance could be simplified to rely on high-level rules, or have interactions with other rules which could be clarified
• the appropriate balance between high-level and more detailed rules
• the potential benefits and costs from simplifying rules

The FCA has said that it has already committed to a post-implementation review of the Consumer Duty, so they are not seeking responses with suggestions for changes to the Duty within this project.

The CCTA will be taking part in this process. We are interested in hearing from members if you have any recommendations. Are there particular areas you can identify that need to be clarified or are no longer required? This is your opportunity to raise these points.

Staying with reducing the regulatory burden, the FCA has also recently confirmed the creation of an independent Cost Benefit Analysis (CBA) Panel to add to the other statutory panels that work with the regulator.

The panel has been tasked with assessing the proportionality of proposed policy changes that the FCA would like to introduce. It will provide advice to the regulator on preparing and improving CBAs.

The Panel began reviewing the CBAs of proposed new policies on 1st August. It will review them in advance of publication, allowing the regulators to consider its recommendations.

We hope the creation of the Panel will mean that the impact of potential policy changes on firms will be fully considered, especially from the point of view of regulatory burden and cost to firms.

It is good to see the regulator taking these steps to consider the future regulatory requirements. The FCA is after all, tasked with delivering competitive markets that work well for consumers.

We need to ensure that the correct balance is struck here so that the pursuit of better regulated markets doesn’t have the unintended effect of pushing firms out, if the regulatory burden becomes too much to bear. Proportionality is the key.