Whilst the UK finalises preparations to leave the European Union, the FCA has made it clear that it will not allow Brexit to deter from its consumer-focussed priorities in 2019/20 and it set out some key factors for regulation in a post-Brexit UK.

The Business Plan outlines four ongoing cross-sector priorities, namely (1) firms' culture and governance, including extending the Senior Managers and Certification Regime to all firms; (2) fair treatment of firms' existing customers through monitoring firms' practices, including the information they give prospective and current customers; (3) developing operational resilience, which will play a vital role in protecting the UK's financial system; and (4) combating financial crime and improving anti-money laundering practices by enhancing the use of technology and data, as well as engaging with multiple agencies and government bodies.

The Prudential Regulation Authority's ("PRA") strategic goals for 2019/20 are in a similar vein, relating to:

  1. Monitoring and embedding structural reforms to banks, keeping implementation of the risk margin under Solvency II under review and starting an evaluation of the effectiveness of the Senior Managers and Certification Regime ("SMCR") and remuneration policies for banks and insurers and for corporate governance at board level.
  2. Adapting to market changes and horizon scanning: this will not only relate to Brexit but also to financial risks arising from climate change and the authorisation of new firms in the UK.
  3. Financial resilience, i.e. ensuring that firms are adequately capitalised and have sufficient liquidity.
  4. Establishing 'operational resilience' in its prudential framework by the end of 2020, to which end the PRA plans to publish a consultation paper in the second half of 2019, setting out its proposed policy.
  5. Continuing its work with the BoE's resolution directorate to ensure firms develop capabilities to wind down their trading and derivatives businesses in an orderly manner and collaborate with international regulators to ensure a co-ordinated and effective approach.
  6. Assessing the competition implications of its policies and checking for any unintended distortions to competition. This will include refining the framework to facilitate the issuance of insurancelinked securities through insurance special purpose vehicles in the UK.

The Pension Regulator's ("TPR") plan for 2019 – 2022 outlines a more proactive and targeted approach, which will see hundreds more pension schemes contacted in the coming year.

Communications clarifying duties and the TPR's expectations will be sent to defined benefit (DB) schemes, newly authorised master trusts, defined contribution (DC) schemes and new employers with auto-enrolment responsibilities.

Further, the TPR will be regulating compliance, with the CMA Market Investigation on Investment Consultants requiring new duties for trustees in their relationships with investment consultants and fiduciary managers

The TPR will also continue to work actively with the FCA and the Money and Pensions Service ("MAPS") on DB to DC transfers to ensure that they work effectively for those who want to transfer but also enable savers to understand the risks involved and the options available to them.

As the past year has seen the TPR's first prosecution for fraud (including custodial sentences) and a number of high-profile matters such as Southern Water agreeing to pay GBP 50 million into its pension scheme, the TPR has shown that it will not shy away from holding to account those who fail to comply with the required standards of pension legislation. The new Business Plan demonstrates that the TPR will continue to make full use of its regulatory powers and firms should expect that the TPR will be stepping up its enforcement and supervision activity. Against this background, insurers have to consider the insurability of fines for breaches of the Pensions Act 2004 or of costs from the appointment of a Skilled Person undertaking an investigation of pension schemes.

In conclusion, the goals and targets set out in the business plans of the three regulators illustrate the expectation that firms promote a culture which benefits consumers and prevents harm from markets, together with a good corporate culture within firms. As both the FCA and TPR aim to increase regulatory activity, this has implications for coverage considerations in relation to investigation costs and regulatory fines.

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