The British Financial Conduct Authority has made several pronouncements on the economic emergency that the global pandemic is causing and its expectations of firms during this 'black swan' event. Operational resilience, access to cash, unsecured debt products and insurance are all part of the picture.

SM&CR responsibilities

The FCA does not require any firm to put a single senior manager in charge of its response to the Coronavirus. Existing responsibilities are specified in the Senior Managers' Regime (SMR), for example SMF24 for operational resilience and SMF2 for financial resilience.

The FCA says that firms should pay particular attention to its statement about Key Workers in Financial Services of (20 March) and recommends that the SMF1 (or another most relevant member of the senior management team), should be responsible for each firm’s approach to its key workers.

Regulatory change

The FCA is reviewing its work plans so that it can delay or postpone activity which is not crucial to protecting consumers from sharp practice and guaranteeing market integrity in the short-term. This will allow firms to concentrate on supporting their customers during this difficult period.

The FCA has delayed several regulatory initiatives and has also scaled back its programme of routine business interactions, so that it will only contact firms on business-critical requests and responses to the Coronavirus and related matters.

It will continue with a small number of regulatory changes which support consumers, particularly the most vulnerable, or the absence of which would disrupt major long-term efforts.

The effects of the emergency on consumers

The FCA rules already give firms leeway in several areas and the FCA expects them to use this leeway to help consumers, bearing in mind the circumstances of each one.

The FCA says that it welcomes firms taking initiatives and going beyond usual business practices to 'support' their customers, especially relating to access to cash. When doing so, firms should notify the FCA, which might offer support.

The FCA still expects firms to deal with complaints promptly. However, wherever the pandemic prevents this they should contact it. They should aim to resolve any complaint within 8 weeks (15 days for payments firms). If they cannot, they should write to their customers and explain why they missed the deadlines.

Insurance products

On 19 March, the FCA published an update about its expectations of general insurance firms during the pandemic. This applies to insurers, brokers and others involved in the service supply chain.

Travel insurance

The FCA likes firms to make consumers aware of the scope of their cover and any exemptions that may exist. Consumers should also be able to find this information expressed on firms’ websites in a clear, concise way and should have access to call centres.

Health insurance

The FCA also expects each firm to be clear about any restrictions it might place on a time period when a consumer takes out a new policy. It might, for example, ban a policy from pay out within 12 or 18 months of the time when the policyholder takes it out.

Mortgages

On 20 March the FCA published new guidance for mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators. Mortgages represent many consumers’ major financial commitment. The FCA is encouraging and facilitating the granting of flexibility on mortgage payments as a way of protecting consumers.

---

Unsecured debt products

The FCA has stated that its rules let firms act in the best interests of their customers. It welcomes the 'support' that they have offered to customers and the encouragement that they have given them to contact their banks or lenders if they are experiencing financial difficulties.

The FCA wants firms to show greater indulgence to customers in persistent credit card debt. It has indicated that firms should relax their normal procedures for dealing with low repayments of persistent debt and give consumers until 1 October to respond to their requests for payment. It adds: "This means that firms would not be obliged by our rules to suspend the cards of non-responders before then."

Access to cash

The FCA is working with the Bank of England and the Payment Systems Regulator to understand problems that consumers may have when accessing cash. It wants to ensure that the UK learns lessons from other countries’ experience of Coronavirus.

British banks have taken steps to give consumers access to cash, not least by raising cash machine withdrawal limits and the limit for contactless card payments.

Firms should continue to help vulnerable consumers access their banking services, both online and over the phone. Firms should also remind consumers to be aware of fraud and protect their personal data.

Operational resilience

The FCA has said that it expects all firms to have contingency plans to deal with major events and it wants firms to test those plans. The Bank of England, the Prudential Regulatory Authority and the FCA are reviewing the contingency plans of a wide range of firms. They are assessing operational risks, the ability of firms to continue to operate effectively and the steps that firms are taking to ensure that their service to customers continues.

The FCA expects all firms to have read, taken account of and acted upon the issues raised in its Consultation Paper on Operational Resilience (CP19-32) of December last year. The paper can be downloaded at https://www.fca.org.uk/publication/consultation/cp19-32.pdf.

Market trading and reporting

The FCA has indicated that firms must consider the broader control environment as they relocate people and functions to new locations/sites or ask them to work from home.

Wherever the FCA's rules require firms to record calls, they should continue to do so if possible. If they cannot, they should make the FCA aware. The FCA requires firms to consider the steps that they could take to offset various risks if they are unable to comply with their obligations to record voice communications.

Firms may experience difficulties in submitting their regulatory data, in which case the FCA expects them to maintain appropriate records during this period and submit the data as soon as possible.

Firms should continue to take all steps necessary to prevent market abuse. This could entail more monitoring or retrospective reviews.

The FCA agrees with the European Securities and Markets Authority's statement about upcoming changes to the 'tick size' regime, a requirement that the European Union's Investment Firms Regulation imposes on certain firms. The FCA will not prioritise supervision of the new requirements at this time. It expects firms to concentrate on minimising the potential for operational disruption.

Guidance issued by the FCA can be found at https://www.fca.org.uk/coronavirus

List of guidance issued by the FCA in relation to the Coronavirus

• FCA information for firms on coronavirus (Covid-19) response, 29 March;
• Work-related travel – responsibilities of senior managers, 29 March;
• Statement of policy: Delaying annual company accounts during the coronavirus crisis, 26 March;
• Joint statement by the FCA, FRC and PRA, 26 March;
• FCA’s expectations on financial resilience for FCA solo-regulated firms, 26 March;
• Banks and building societies – branch access for essential services, 25 March;
• Impact of the coronavirus on firms’ LIBOR transition plans, 25 March;
• Bank branch opening, 24 March;
• UK markets, 23 March;
• Announcement of preliminary accounts: technical Q&A for firms, 22 March;
• Key workers in financial services, 20 March.

Delayed consultation papers, 'calls for input' and planned publications

The FCA has decided to extend the closure dates for the following published consultation papers and 'calls for input' until 1 October.

Delayed consultation papers

• CP20/4: Quarterly consultation No 27;
• CP19/32: Building operational resilience: Impact tolerances for important business services;
• CP20/1: Introducing a Single Easy Access Rate for cash savings;
• CP20/3: Proposals to enhance climate-related disclosures by listed issuers and clarification of existing disclosure obligations;
• CP20/5: Consultation paper on ETF Listing: Premium to Standard Listing.

Delayed 'calls for input'

• Open finance; and
• Accessing and using wholesale data.

All deadlines for responses, as stated before, have now moved to 1 October.

Delayed publications

The FCA has decided to delay the following publications that it intended to release before the end of June. It will provide updates at an appropriate point.

• Joint PRA-FCA work with the Climate Financial Risk Forum (CFRF) to develop industry-led guidance about how to integrate climate-related risks into business decision making throughout the financial services sector.
• A motor finance policy statement.
• A consultation paper about mortgage switching.
• Guidance and research regarding 'vulnerability.'
• Options to change various things in the light of the FCA's Duty of Care Feedback Statement.
• Consumer Credit Act (CCA) review.
• Credit Information Market Study – interim report.
• GI Pricing Final Report and Consultation Paper on Remedies.

* Jonathan Greenstein can be reached at Jonathan.Greenstein@complyport.com