Investment Management in Financial Services UK
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Technology and innovation (“FinTech”) again featured prominently in this year’s Financial Conduct Authority (FCA) business plan. Andrew Bailey, Chief Executive of the FCA, remarked that “technology is supporting competition, transforming markets and changing the way consumers engage with them. […] creating a conveyor belt of risks and opportunity”. Given this, and despite the need for the FCA to dedicate a significant proportion of its resources to the UK’s withdrawal from the EU, FinTech was confirmed as a key priority for the FCA over the coming year. The two specific FinTech priorities highlighted in the business plan are: Innovation, big data, technology and competition and Data security, resilience and outsourcing.
The Prudential Regulation Authority (PRA)'s emphasis on technological innovation in its business plan is relatively less pronounced. Nevertheless, it too is exploring ways to innovate as a regulator, by continuously monitoring FinTech developments, and supporting the authorisation and supervision of new banks and insurers.
On 5 April 2018 the FCA published a policy statement, summarised in our recent blog, on its first round measures as part of its asset management market study. Particular interest has been generated by the new rules and prescribed responsibility this contains on assessing value for money. In this blog, we focus on these new rules and consider their implications for firms and senior managers.
Deloitte and UBS hosted a roundtable on Artificial Intelligence (AI) at the recent Innovate Finance Global Summit 2018 (IFGS18). We had representatives from across the FinTech ecosystem covering incumbents, start-ups, scale–ups, consultants and other service providers.
AI is clearly a hot topic and there are a number of challenges and opportunities to explore. We chose four key themes, crowdsourced from experts in the area:
- Navigating the hype
- Bias and transparency
- Role of the regulator
After a lively discussion, we used a voting system to identify the top messages by theme. The messages that earned the highest number of votes are summarised below.
As part of its asset management market study, the FCA has published:
- a policy statement on its measures on fund governance, moving investors to better value share classes, and treatment of dealing profits;
- a consultation paper on proposed measures on investor disclosures; and
- an occasional paper on costs and charges disclosures.
These papers follow the FCA’s final report on its asset management market study which was published in June 2017 (see our blog). 1 Below we summarise the key rule changes and assess the implications for firms.
The Government’s recently published response to the House of Lords European Union Committee Report “Brexit: The Future of Financial Regulation and Supervision”1 gives us part of the answer to this question. Much of it confirms what was already known or widely expected. The UK will remain a strong proponent of, and adherent to, global regulatory standards, including those set by the Financial Stability Board and the Basel Committee on Banking Supervision. The UK regulators will continue to adopt a proportionate approach to the application of regulation, with the Government welcoming the PRA’s “proportionate application of Basel rules”. And the Government and regulators will ensure that regulation supports innovation, including through fintech.
Signalling from reinsurance CEOs around the 2017 earnings announcements has been more bullish about the outlook for their industry than in previous years, citing increasing interest rates and a hardening market. But is this optimism merely panglossian naivety? And if not, how might the reinsurance industry feasibly improve its results?
In 1957 British Prime Minister, Harold Macmillan, made an rousing speech declaring that "most of our people have never had it so good"1. The phrase went down in history and people born at the time – the Baby Boomer generation – went on to be far better off than their parents.
But the trend didn’t last. It’s not clear when or exactly why this happened but, as Deloitte’s Chief Economist, Ian Stewart, explains here, we do know that on average older people in Britain have done better than the young in terms of wealth, incomes and benefits in the last decade or so.
The European Commission’s FinTech Action Plan, published today, represents a significant milestone in the development of EU financial services (FS) policy. It gives the strongest indication yet that technological innovation and disruption will be among the main drivers of the EU’s future FS policy agenda, particularly after the next Commission takes office in 2019.
Under IFRS 9, financial institutions are required to account for loan loss impairment by recognising an allowance for expected future credit losses (IFRS220.127.116.11) in a manner that considers a range of possible outcomes (IFRS18.104.22.168), including current conditions and a range of forecasts of economic conditions (IFRS9.B.5.5.49).
The European Commission (‘the Commission’) set out its plans for a regulation and directive to amend the prudential rules for investment firms. The Commission’s proposals are closely aligned to recommendations published by the EBA last September as described in our previous client note, with some important clarifications.