What does the Regulatory Initiatives Grid tell us about the future of regulation?

On 7 May 2020, the Financial Services Regulatory Initiatives Forum (the Forum) announced that the Regulatory Initiatives Grid (the Grid) had been launched ahead of its summer 2020 release date. The Grid aims to provide financial institutions (FIs) with a horizon scanning tool for regulatory change over the next two years. It has been released ahead of schedule given the current COVID-19 pandemic, with a view to ease regulatory burden and better equip firms to plan for the future. As noted in the Foreword by the Forum’s co-chairs, “The financial services industry needs a clear understanding of the regulatory pipeline. This is important in usual times. But it is vital in a crisis.”

While the Grid is not fully comprehensive (it doesn’t contain cross-jurisdictional or smaller regulatory changes), it does cover substantial regulatory events that might require significant operational planning for financial institutions. But what does the Grid actually tell us about future regulatory change? Does it provide clarity amidst the current sea of uncertainty?

The calm before the storm: regulation on hold

Regulatory events within the Grid are separated into three time periods:

• Near-term (from now through to summer);
• Medium-term (end of summer to March 2021); and
• Longer-term (April 2021 onwards)

The near-term priority for regulators and financial institutions alike is, of course, responding to the impact of COVID-19 and attempting to mitigate its negative effects. The near-term period therefore looks to be relatively quiet across the regulatory landscape as forum members take steps to postpone existing events to free up operational capacity.

This quieter near-term period has a knock-on effect on the medium-term. As numerous consultation periods are moved to October, there is the potential for “a substantial volume of policy” to be finalised later in the year. Firms will need to keep abreast of any potential implementation dates – especially given that it coincides with the end of the transitional period for the UK’s exit from the European Union. Many of these dates within this period are unconfirmed and may be subject to change in the future, depending on the path that the regulators and the Government take over the coming weeks and months. As such, the Grid still leaves a degree of uncertainty around the planning of policy finalisation and implementation dates, which the Forum “will continue to review”.

Continued uncertainty

It is interesting to note that the Forum has released the Grid ahead of schedule in a bid to provide clarity and certainty to financial institutions’ future plans. But with many of the regulatory event dates still under review the level of certainty provided is questionable. FIs will need to continually monitor the Grid and the movements of financial regulators to ensure they do not miss date changes. Firms that continue to use manual processes and large teams to conduct these searches will still find themselves hard pushed to keep up.

Looking then to the longer-term, the degree of certainty provided is unclear as the Forum notes it will “remain the subject of further consideration in both the international and domestic arenas”. For now, FIs can take solace in the fact that the lead times of many substantial regulatory changes and implementations has been extended – particularly those that address globally agreed regulatory objectives or the UK’s implementation of international standards. For now, at least, there is some breathing space.

No replacement for change management 

The Grid shows that UK regulators across the board are aware of the regulatory challenges that financial institutions are subject to and is a firm sign that they are serious about ensuring firms are keeping on top of regulatory changes. It goes some way to enabling and aiding the change management process. However, it is a small step in an industry that is inundated by constant changes.

The Grid is not comprehensive and only covers substantial changes from UK regulators. It does not cover changes across jurisdictions, or those smaller, less operational changes which are harder to spot. Firms will need to trace and track these regulations through their existing processes – a task that can be time-consuming and cumbersome if using manual methods.

While the Grid is a helpful tool, the industry should not lose sight of the fact that this is yet another regulatory source that change management teams will need to add to their repertoire and manage systematically. Without an automated change management platform in place, the process of keeping abreast of these changes will remain complex and potentially labour intensive.