Insurance in Financial Services UK
- Select a blog category
Biased Expectations: Will biases in IFRS 9 models be material enough to impact accounting values, as well as other applications such as pricing?
As European IFRS reporters enter 2017, the first generation of Expected Credit Loss (ECL) models have generally been developed, and granular transitional impacts quantified.
‘We want to ensure that the process of complaining is straightforward, transparent and fair to consumers, while allowing firms to handle complaints as efficiently as possible and for consumers to have effective access to the ombudsman service if they remain dissatisfied.’ Financial Conduct Authority (FCA)
Looking ahead to 2017, one of the most important areas of regulatory development that we see in financial services is rising supervisory expectations of firms’ cyber resilience. A spate of recent incidents of cyber-crime and IT failure have sharpened the focus of firms on their cyber preparedness, but management and boards should now also expect to be more routinely challenged by their supervisors on how well they understand and what they have done to limit their exposure to cyber and IT risks.
2016 has been another difficult year for the financial sector, with economic and political uncertainty complicating the completion of the post-crisis regulatory repair agenda.
European Commission proposes 12 month PRIIPs Delay, but uncertainty around timing of the legislation means firms should maintain momentum
On 9 November, the European Commission published a legislative proposal to extend the application date of the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) by one year. PRIIPs requires the disclosure of Key Information Documents (KIDs) when PRIIPs are sold to retail investors. The delay has been widely anticipated by the market and gives manufacturers and distributors of PRIIPs products until 1 January 2018 to put implementation plans in place. The Commission did not amend any other provisions in the Level 1 text. The proposal follows a vote by the EU Parliament on 14 September to reject the EU Commission’s Regulatory Technical Standards (RTS) on PRIIPs and concerns expressed by 24 Member States in the Council in a vote by the Competitiveness Council of the EU on 20 September (see our blog of 20 September for further detail on the Parliament’s rejection of the RTS).
There has been no shortage of deeply damaging scandals affecting the financial services sector in recent years, all of which can be linked to governance and cultural failings. Andrew Bailey, who recently moved from CEO of PRA to lead the FCA, has on numerous occasions spoken on the importance of corporate culture and has stressed that “the culture of firms…is of the utmost importance to regulatorsi”.
On 28 September the Financial Conduct Authority (FCA) released a Policy Statement setting out its final rules on regulatory references under the Senior Managers and Certification Regime (SMCR). The Policy Statement is relevant for deposit-takers, Prudential Regulation Authority (PRA) investment firms, insurers, solvency II insurers and non-directive insurers and will be of particular interest to those individuals who seek regulatory approval to perform a Senior Management Function (SMF); a Significant Insurance Management Function; an FCA controlled function or a Significant Harm Function (SHF).
On 14 September, the EU Parliament voted to reject the EU Commission’s Delegated Regulation on the Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs). This is the first time that the EU Parliament has formally rejected technical rules on financial services legislation. The Delegated Regulation, based on the final draft Regulatory Technical Standards (RTS) prepared by the European Supervisory Authorities (ESAs), dated 31 March 2016, was rejected as “so flawed and misleading that it could actually lose [retail investors] money”. MEPs overwhelmingly passed the resolution rejecting the RTS (by 602 votes to 4, with 12 abstentions), calling for the EU Commission to submit a new RTS taking into account the EU Parliament’s concerns about the text. The Parliament also called on the EU Commission to postpone the application date of PRIIPs.
The Financial Conduct Authority (FCA) has published its further consultation paper on the future of payment protection insurance (PPI) complaints. CP 16/20 adds further detail to the regulator’s plans to bring the ongoing issues raised by the historic sales of PPI to an orderly close, with a final date for making new complaints now estimated for June 2019.