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Our blog explores the latest issues in financial services risk and regulation.

05 September 2019

MiFIR trading obligations: Is Brexit contingency planning over ?

With the prospect of a no-deal Brexit occuring on 31 October, the financial services industry continues to call on regulators to take further action to avoid a fragmentation of financial markets. The European Commission (EC) has repeatedly said that its planning for no-deal has concluded. For financial services, they proposed two measures: guaranteeing access for twelve months to UK central counterparties and providing relief from margin and clearing requirements for contracts transferred from the UK to the continent.

Insurers and the SM&CR: Lessons from the banking stocktake report

As the December deadline approaches for insurers to finish certification under SM&CR, the FCA’s stocktake report on how banks have embedded the regime gives insurers the opportunity to learn from its conclusions. Any issues identified by the FCA in the banks will read across to other sectors.

04 September 2019

Trust me, I’m a robot - Explainable AI in Financial Services

The Financial Conduct Authority (FCA) has signalled that firms should focus on achieving “sufficient interpretability”, essentially a compromise between AI functionality and the ability to clearly explain its decisions to stakeholders. While sensible, the definition itself raises a number of questions firms need to tackle. First, the level of explainability that will suffice is unclear. Decisions reached with the help of AI may be explainable to a firm’s Chief Digital or Data Officer, but would a retail customer understand the implications?

03 September 2019

Tackling vulnerability and financial exclusion: When talk can be highly valuable

Financial vulnerability and exclusion are widespread but often hidden problems. That’s why it’s so important that we get them out in the open and have a real conversation about the risks and how to tackle them.

02 September 2019

Coming a cropper - Data farms and insurance fraud

Amidst other significant enforcement activity, the Information Commissioner’s Office (ICO) recently reported raids on two UK addresses as part of an ongoing investigation, conducted in partnership with the Insurance Fraud Bureau (IFB), into the suspected illegal acquisition and sale of personal data. The suspicion was that high volumes of data farming activity, or vishing, was taking place at these addresses to illegally obtain the personal data of motor accident victims to sell on to solicitors for personal injury insurance claims. In the context of the ongoing fight against insurance fraud, this is an important development. In this blog I highlight three of the most important themes I took away from it.

21 August 2019

Tomorrow, today: Modernising financial services to serve future generations

By Jane Portas, Partner, PwC Far from being just a compliance exercise, the Financial Conduct Authority’s proposed guidance on the treatment of vulnerable customers can provide a catalyst for modernising your business, fostering a more customer-centric culture and re-engaging with a changing society. Are you ready? The FCA estimates at...

16 August 2019

Regulatory challenges for banks in a no deal Brexit scenario

With the Brexit negotiations currently deadlocked and no clear route towards an agreement between the UK and EU-27, the chances of a no deal Brexit are higher now than they have ever been. Banks should ramp up their planning to meet changing regulatory requirements in both the UK and EU in the event of a no deal scenario.

14 August 2019

Breaking the “Barriers to Growth”

Since its inception in 2013 the PRA and FCA’s New Banks Unit has made great progress in reducing barriers to entry for new banks in the UK. But while there is clearly an increased number of banking competitors in the market today, “no small bank has successfully become a large...

Evolution or Revolution? HMT fires the starting gun on its review of the UK’s future regulatory framework

Whatever the UK’s relationship with the EU ends up looking like, it’s clear that the UK’s regulatory framework needs to adapt to the new reality. This is driven not just by the fact that the UK will no longer be subject to the EU’s regulatory framework (assuming the UK leaves the single market), but also because of the scale of change and disruption in financial services from technology, new players and changing demographics.

13 August 2019

Seeing beyond Peak Reg: collaboration between regulatory and strategic projects

By Brian Polk, Director So far in this series of blogposts on bank regulation, we’ve looked at whether ‘Peak Reg’— the point at which the advancing tide of banking regulation pauses and goes into retreat—has been reached (short answer: ‘almost’); and examined the emerging priorities shaping future regulation in a...

12 August 2019

Sustainable investment in the spotlight: what asset managers should look out for

By Lucas Penfold and Leo Donnachie Sustainable investing is attracting unprecedented levels of attention from regulators, both domestically and internationally. With an increasing public appetite for investments which generate a positive social impact and sustainable returns, the associated regulatory environment comes with new challenges for asset managers. But what are...

01 August 2019

CASS audit reports on nominee companies

SUP 3.10.5 R (3) requires the CASS audit report to include an opinion on a nominee in whose name client custody assets are registered. However, working out whether the rule applies in particular circumstances, and what the report should say; is less than straightforward.

Understanding the EU’s equivalence framework for FS

The European Commission (EC) released its Communication document on the equivalence framework for financial services (FS) on Monday, 29 July 2019, updating an earlier Staff Working Document. It sets out the Commission’s equivalence policy priorities, and puts the EU’s recent legislative efforts into that context. It also seeks to build consistency into the assessment and the decision making processes around equivalence.

31 July 2019

Brexit financial services risk update - are we nearly there yet?

With a new Boris Johnson-led government putting No Deal back on the table and a new European Commission remaining consistent in refusing to re-open the Withdrawal Agreement before 31 October, firms will be grateful that the decision to postpone Brexit earlier this year means they still have some time remaining to prepare. So how have firms used the extra time? And have Brexit risks reduced or have new ones emerged?

28 July 2019

Using IFRS 17 as a catalyst for Finance Transformation: What's all the fuss about?

IFRS 17 as a catalyst for finance transformation and digital change within an insurance company - Is this a crazy idea? IFRS 17 is an accounting standard after all so it's only for accountants to think about isn't it? Why should an insurer change their whole business approach and systems to comply with an accounting change? and surely other regulatory changes have offered this opportunity too?Over the last 2.5 years, I've been more intensely involved with IFRS 17 and linking with PwC insurance teams all over the world. I've recently heard clients being increasingly receptive to including other areas into their IFRS 17 projects. To be honest, some insurers still see IFRS 17 as a pure technical accounting exercise to comply with the Standard set by the IASB, where others are running full scale finance transformation projects and using IFRS 17 as a catalyst.

26 July 2019

Beyond prudential regulation: welcome to the next wave of regulatory priorities

By Brian Polk I began this short series of blog posts on developments in bank regulation by asking whether ‘Peak Reg’ has been reached—the point at which the advancing tide of banking regulation pauses and goes into retreat. As ever in the global regulatory field, there’s no single, hard-and-fast answer:...

25 July 2019

Don’t leave it too late to get your governance right

Governance can often be seen as an administrative burden - agenda setting, minute taking, cross referencing between committees. It can be seen as a ‘need to do’ rather than something that helps an organisation achieve success. In the worst cases, it can be seen as something that needs to be circumvented to actually get things done in an organisation. That is, until something goes wrong

The end of legacy systems is nigh

The Treasury Select Committee (TSC) heard from representatives from the PRA, BoE and FCA on 24 July, in what we believe to be the last session in its inquiry into IT failures within financial services. This follows earlier sessions with industry representatives, as well as PwC and TheCityUK where we discussed our recent report on operational resilience.The questions in this latest session were predictably wide-ranging as the committee members looked for assurance from the regulators on how well prepared financial services firms are to withstand operational disruption, and to find out more about future plans to enhance the industry standards as well as develop the regulators’ own capabilities. Two key themes stood out for us.

15 July 2019

Parliament keeps the spotlight on operational resilience

When you enter the Houses of Parliament it is impossible not to be impressed by the historical significance of the setting. But despite the Victorian grandeur of the location we were there this week to discuss a very modern phenomenon - IT and other operational failures in the financial services sector. Following a number of high profile operational incidents in the financial services sector in recent years, the Treasury Select Committee (TSC) has launched an inquiry into this topic. We were very privileged to be called to give evidence to the first public session of the inquiry to discuss a recent report we produced with TheCityUK on operational resilience.

Making the first move on technology for regulatory reporting quality assessments

A speech by Mark Carney, the Governor of the Bank of England, in June 2019 stated that the Bank of England is launching a review to explore the transformation of the hosting and use of regulatory data over the next decade. This includes proofs of concepts to test how the Bank can automatically extract regulatory firm data.  The speech clearly highlighted the Bank’s increased focus on exploring how Artificial Intelligence (AI) and Machine Learning (ML) technologies can be used to collect and interpret supervisory data from firms to minimise manual processes. The Bank aims to pull the data on demand from firms, making the regulatory reporting process more efficient and less expensive.