In 2020, COVID-19 dominated everything, sweeping away all regulatory plans for the year with regulators focusing on providing support to both firms and their customers. We expect the regulators’ recovery efforts to continue. That said, what else can we expect to be a priority in the regulators’ agendas? This month’s insight captures some of the key regulatory themes that global regulators are focusing on that we have come across.
Environmental, Social and Governance (ESG)
ESG is a primary focus of regulators, with the rapid increasing volume of related measures in 2020 set to increase in 2021. Incoming regulations include Sustainable Finance Disclosure Regulation, Taxonomy Regulation, FCA’s climate-related financial disclosures for market participants and combat greenwashing, as well as the launch of the Bank of England’s Climate Biennial Exploratory Scenario.
Prudential reform
Incoming regulation include the EU’s Investment Firms Regulation (IFR) and the Investment Firms Directive (IFD) which will take effect in June 2021, delivering a tailored prudential regime for investment firms. The UK will adopt its own Investment Firms Prudential Regime (IFPR) targeting implementation for the start of 2022. Both the UK and EU regulators are expected to begin implementing the final outstanding Basel III standards this year.
UK’s regulatory framework post-Brexit
The UK government’s consultation on the future UK framework triggers a broad review of areas in which the UK may begin to diverge from EU rules. This will impact firms doing business in the UK, including those operating on a cross border basis into the UK. Incoming regulation include the finalised Financial Services Bill which details the UK government’s approach to the post-Brexit world.
Operational Resilience
The FCA, PRA and Bank of England will soon finalise their rules aimed at building the resilience of the UK financial services sector to operational disruption. The 2021 focus will be on what firms should do to withstand other causes of disruption like data breaches and IT system outages.
Financial crime and market conduct
2021 will see regulators taking an increasingly holistic approach to mitigating financial crime risks arising in the wake of COVID-19, including fraud and scams, market abuse and market conduct issues.
Fintech
There is a broader global focus on Fintech. There will be incoming regulation of stablecoins, crypto-assets and crypto-derivatives, as well as steps to encourage fintech firms to set up in the UK – and stay as they grow. Other key developments include a review of the UK criminal market abuse regime and possible divergence from the EU, and potential reform to laws around corporate crime liability in the UK.
Other areas of interest to keep a mindful eye on include: Consumer Protection, AIFMD2, LIBOR, Culture and Conduct.