Regulation round-up May 2013

Information for all firms

Regulation round-up

Regulation round-up is our monthly email to FCA regulated firms providing updates on the latest news affecting the sector you practice in. We have sent this  to all firms this month, which is why you may be receiving this communication for the first time. If you would like to unsubscribe from this email, or if you would like it to go to someone else at another address, please email: [email protected]

PS13/05 – The FCA Handbook – reminder to firms

This Policy Statement contains the necessary changes required to our Handbook to help deliver the new regulatory framework for financial services, which started on 1 April 2013. Please see our website for further information on issues such as disclosure text, Skilled Persons Reports and approved persons.

Risks to customers from financial incentives

In January we published Finalised guidance to help firms address the risks to customers from financial incentives. To assist firms, we have prepared a One Minute Guide.

We expect firms to consider carefully whether they have incentive schemes that increase the risk of mis-selling, review whether their governance and controls are adequate, and address any inadequacies. One example of a financial incentive is where advisers or sales staff are remunerated by 100% variable pay, including where there is a share of commission or fee income.

We will be carrying out further work in this area beginning with an online assessment of how firms identify and manage the risks linked to their financial incentives arrangements. If your firm is selected for an assessment you will receive a notification and should complete it as fully as possible within the timescale given.

We will carry out some follow up work with a number of the firms who are selected for the online assessment.

Financial Advisers

Opportunity to participate in a European Banking Authority (EBAs) Banking Stakeholder group
We would like to draw your attention to an opportunity to participate within the EBAs Banking Stakeholder group. While the title may lend itself to the view that is for banks only, consumers users of banking services and representatives of SMEs are able to contribute.

Insurers / Insurance intermediaries

Martin Wheatley speech at the BIBA conference ‘Meeting the growth challenge’
Martin outlined his vision of regulation that supports the insurance industry’s focus on customer experience, and encouraged the market to make profits in the right way so that consumers and the wider financial services industry benefit. He also announced a strategic review into the claims process which we are undertaking, which will look at themes across the general insurance market but with a particular focus on household and travel claims.

Mortgage Brokers

Mortgage Market Review (MMR)
On 15 May, we published a Consultation Paper (CP) on data reporting changes that follow the reforms in the MMR. The proposals in this consultation will help us supervise compliance with the MMR reforms more efficiently and effectively, particularly the responsible lending reforms and the enhanced prudential requirements for non-bank lenders.

Our CP proposes additional data items to be collected in Product Sales Data (PSD) and the Mortgage Lending and Administration Return (MLAR). We are seeking responses to the consultation by 15 August 2013.

MMR Webcast
We have developed a webcast of the material we presented at the MMR roadshows earlier this year. If you were not able to attend any of the roadshows,  the webcast is an opportunity for you to find out what the reforms are, how they affect you and your firm and also find out what our key messages were. It is also a refresher of the reforms for all firms and their staff.  The webcast is available on the FCA website and can be accessed here.

FCA publishes findings of review into interest-only mortgages and reaches agreement with lenders to contact interest-only borrowers
We published our research into consumers’ ability to repay their interest-only mortgages when they mature. The findings show that many people should be in a good position to repeat their mortgage when it is due for repayment.

However many borrowers, particularly those whose mortgage is due to be repaid before 2020, will need to take control of their mortgage repayment planning now. FCA, the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) are working together to ensure lenders contact their borrowers in order to prompt them into checking their plan for repayment is on track and considering the options available to them. Further information is available here.

To help lenders understand how they should treat concerned borrowers, the FCA is also publishing proposed guidance.