HM Treasury has published its response to the Call for Evidence on Regulatory Coordination as part of the Financial Services Future Regulatory Framework Review (‘the Review’).
The government initially launched the Review in July 2019 and sought stakeholders’ views on the coordination between UK regulatory bodies with responsibility for regulation of financial services in the UK.
The Review is designed to assess how the UK’s regulatory framework can be adapted and moulded to ensure it remains fit for purpose over the coming years. It’s no secret that the regulatory landscape is changing at pace; new technology is on the rise, bringing with it a wealth of new risks – as well as pioneering new solutions. As firms find themselves facing greater pressures across the board, there’s a call for regulators to work collaboratively to ensure that the regulatory system is watertight and does not place more burden on financial institutions than is necessary.
Industry response to Call for Evidence
The Call for Evidence focused, in particular, on the range of regulatory activity that is being undertaken, how firms and regulators are taking advantage of new technology, and how firms might adapt their internal systems to allow them to respond to regulatory initiatives in a more efficient manner. The government received over 60 responses, which raised the following key issues:
- Regulators should work more with the industry to exploit the opportunities offered by RegTech to make regulation and supervision more efficient.
- The volume and timing of regulatory initiatives has a significant impact on firms. Regulators should coordinate to avoid undue pressure and ensure that obligations are manageable.
- Responding to consultations can be resource intensive for firms. Issuing multiple consultations in the same time period should be avoided (this also applies to regulatory activity in general).
- Cost/benefit analysis of new regulatory proposals should be as robust as possible.
- Data requests are resource intensive for firms. Regulators should collaborate to ensure such requests are ‘targeted, proportionate’ and only made where they genuinely aid regulation.
In response, the government has recognised that financial regulators must coordinate effectively to ensure that regulatory requirements do not conflict and overlap, therefore reducing the likelihood that firms will become overwhelmed by regulatory change. It also acknowledged the potential for RegTech to “reduce the burden of regulatory reporting”.
The government took the opportunity to announce that it will launch a Regulatory Initiatives Grid (‘the Grid’) in summer 2020 to help firms keep on top of their ever-changing regulatory obligations. The Grid will be managed by the Financial Services Regulatory Initiatives Forum and will provide a two-year horizon scan of major upcoming regulatory initiatives and expected regulatory activities. While it is likely the Grid will allow firms to better anticipate upcoming regulatory change, it will only cover key initiatives. The pressure will therefore continue to be on firms to invest in new technology and systems to ensure that they keep pace with regulatory change and avoid non-compliance.
The government intends to publish a White Paper on Financial Services in the Spring, in which it will set out how the Review fits within its vision for the future of financial services. We’ll be covering this as it develops.