FCA considers banning certain commission models following motor finance review


The FCA has recently published the final findings of its review of the motor finance sector. The review found that the way some commission arrangements are operating in motor finance may be leading to consumer harm on a potentially significant scale1. The FCA has started work to assess the options for policy interventions - including banning certain commission models - to address the potential harm it found.

The FCA is also not satisfied that firms are meeting regulatory requirements around customer communications and affordability assessments. It plans to follow up its concerns through supervisory work with individual firms.

This blog summarises the key findings of the FCA’s review and sets out the implications for firms, recognising that, whilst the findings and potential remedies of the FCA’s review are targeted at motor finance lenders and brokers, they raise issues of potential relevance to commission models, customer communications and creditworthiness assessments across the consumer credit sector.

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Posted on 15/03/2019 | 0 Comments

The FCA takes forward investment pathways and other remedies from its Retirement Outcomes Review

Nest egg 1
The FCA recently published a package of measures to address the potential harm it found during its Retirement Outcomes Review (“ROR”). The package includes:

  • a consultation aimed at improving outcomes in the drawdown market including the introduction of ‘investment pathways’ to help non-advised consumers choose the best way to invest their money; and
  • final rules and guidance aimed at improving the information consumers receive in the lead-up to, and after, accessing their pension savings.

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Posted on 08/03/2019 | 0 Comments

The future of defined benefit pensions – the regulatory framework for “superfund” consolidators


The importance of the Department for Work and Pensions (DWP) December 2018 Consultation on defined benefit (DB) pension scheme consolidation does not need to be stated. However, were there any doubt, the breadth and depth of the responses to the consultation, following its close at the beginning of February, underscore how critical the legal and regulatory framework for “superfunds” will be.

This blog explores some of the key proposals in what we consider to be the most critical areas covered by the DWP’s consultation, together with the feedback and proposals that the DWP has received in the respective responses of The Pensions Regulator (TPR), the Pension Protection Fund (PPF) and the Prudential Regulation Authority (PRA).

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Posted on 07/03/2019 | 0 Comments

Time for change: Elevating the role of the risk function

Risk Function

For the last decade, risk functions have spent considerable time and energy ensuring they are effective and compliant with regulatory change. Many have capitalised on the significant advances in technology to improve efficiency, but are still not yet realising a level of transformation that is possible. Mark Ward, Lead Partner for our Future of Risk and Compliance programme encourages Chief Risk Officers (CROs) to critically assess if they are fit for the future and consider:

  • What does transformation mean to you?
  • How can you deliver an effective transformation programme?

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Posted on 01/03/2019 | 0 Comments

IFRS 17 - How prepared is your IFRS 17 programme?


In November 2018, the IASB announced a proposed amendment to the IFRS 17 standard revising the effective date from 1st Jan 2021 to 1st Jan 2022. The proposed twelve month delay is based on case study and industry feedback to the IASB and allows insurers more time to assess and implement changes required to meet the IFRS 17 requirements as set out in the standard. As mentioned in ‘IFRS 17 implementation – What are insurers doing to prepare’ [Ref] amendments to the standard are expected to be confirmed later in 2019. IFRS 17 programme leadership are being thoughtful on how to adapt their programmes and optimise the programme's effort during this interim period to the IASB confirming any outlined changes to IFRS 17, whilst progressing with the current implementation plan.

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Posted on 27/02/2019 | 0 Comments

The end of the Term Funding Scheme

End of the Term Funding Scheme

We do not currently expect there to be an extension to the Term Funding Scheme [“TFS”] nor a replacement scheme. Therefore, the ending of the scheme will require a significant change in the funding plans of many UK lenders, some of whom have become reliant on central bank funding to drive growth. As a result we expect securitisation markets to revive and deposit rates to increase in the near term, especially around peaks in the scheme’s maturity profile. The notional value of UK covered bond schemes is also likely to rise for smaller, less highly rated issuers seeking attractive spreads. To avoid sharp increases in their underlying cost of funds, Treasurers will have to move early and look to develop their funding infrastructure well in advance of their contractual maturity payments to the Bank in order to avoid costly funding issues and potential headwinds to future growth.

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Posted on 21/02/2019 | 0 Comments

IFRS 17: The Challenges for Reinsurance


Reinsurance continues to be one of the most contentious aspects of the standard for our clients. The key question remains - will the standard setters finally resolve the issues highlighted by reinsurers and direct insurers in terms of the measurement model for reinsurance?

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Posted on 19/02/2019 | 0 Comments

A ride up Capit(a)l Hill


As a key determinant of bank solvency and therefore a critical component of financial system stability, a banking applicant’s capital assessments receive significant scrutiny from regulators as part of the application process.

Alongside the Regulatory Business Plan (RBP), The Internal Capital Adequacy Assessment Process (ICAAP) is therefore one of the most important pieces of work you will need to perform in the run up to receiving your authorisation, and thereafter on an on-going basis.

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Posted on 18/02/2019 | 0 Comments

IFRS 17 implementation – what are insurers doing to prepare?


In mid-November, the IASB confirmed its intention to propose a 12-month deferral of IFRS 17 along with a parallel shift of the deferral of IFRS 9 for insurers if those insurers use the option to defer IFRS 9. They recently discussed potential amendments to IFRS 17 ‘Insurance Contracts’ across thirteen topics at their London meeting on 11-13 December 2018. Of these, the Board decided to amend for one topic (balance sheet presentation), deferred one topic (on transition) but agreed not to amend the remaining eleven. A further twelve topics are expected to be discussed in early 2019.

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Posted on 04/02/2019 | 0 Comments

The FCA’s changes to overdrafts and high cost credit


The FCA recently published two Consultation Papers (CPs); CP18/42 which proposes changes to overdraft regulation; and CP18/43 which proposes changes to the regulation of various high cost credit products.

Attention has focussed, in particular, on the proposed changes to overdrafts, which would:

  • end the distinction between arranged and unarranged overdrafts;
  • stop firms charging fixed fees for overdrafts; and
  • require firms to apply APR pricing to their overdrafts.

This blog summarises the package of changes proposed in the two CPs and explores their potential implications for firms.

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Posted on 24/01/2019 | 0 Comments

The Bank of England and PRA’s Resolvability Assessment Framework: end-state resolvability in firms’ hands

Banner_ImageIn December, the Bank of England (the Bank) and Prudential Regulation Authority (PRA) consulted on the Resolvability Assessment Framework (RAF) for firms[1] in the UK.

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Posted on 23/01/2019 | 0 Comments