Financial industry update: Covid-19’s impact on regulation
The global Covid-19 pandemic is forcing all of us all over the world to review and adapt to new regulations—whether that’s government-enforced regulations for staying at home or conduct and operational regulations in the workplace.
Despite the new ground we are walking, for many businesses, expectation and demand is as high as ever when it comes to both services and issues of regulation—especially for those operating in the financial sector.
To keep you up-to-date with developments in compliance protocol during these challenging times, we have collated some of the latest key announcements from financial authorities that are affecting the UK and beyond.
Compliance measures remain ridged
The Financial Conduct Authority (FCA) has taken a relatively hard stance on financial reporting protocols. Back at the beginning of March, the FCA stated:
“We expect firms to take all reasonable steps to meet their regulatory obligations. For example, we would expect firms to be able to enter orders and transactions promptly into the relevant systems, use recorded lines when trading and give staff access to the compliance support they need. If firms are able to meet these standards and undertake these activities from backup sites or with staff working from home, we have no objection to this.”
Essentially, what this means is that despite an industry-wide shift to remote working, compliance procedures remain very much in place, with businesses left to adapt to meet requirements.
That said, the FCA has been working alongside the Bank of England to review contingency measures for financial firms—covering issues such as operational risks, customer support and business continuity.
Two-month leeway for annual reports announced
Towards the end of March, the FCA, Prudential Regulation Authority (PRA) and the Financial Reporting Council (FRC) announced that listed companies would be afforded an additional two months to publish their annual reports, given the current market uncertainty.
That does not, however, extend to information disclosure agreements set out by The Market Abuse Regulation (MAR), requiring companies to disclose inside information as soon as possible should a situation require them to do so under regulation.
Best Execution Requirements publication deadline moved
Supervisory flexibility will be offered to traders and investment managers by the FCA who may be struggling to deliver their best execution requirements on time. The FCA will not take action against firms should they not publish reports by April 1st, but will do so after 30th June.
The Bank of England asks banks to suspend dividends and bonus payments
Following a plea from the Bank of England, Britain’s largest banks have agreed to scrap nearly £8 billion in dividends to weather the potential economic storm caused by Covid-19.
Leading Banks such as Barclays, HSBC, Lloyds, Royal Bank of Scotland and Standard Chartered have all agreed to temporarily halt pay-outs—which also extends to Executive bonuses.
European businesses to assess ongoing preparedness
Across Europe, the European Central Bank (ECB) has issued a statement to financial institutions requiring them to orchestrate a full review of their contingency planning and preparedness in light of Covid-19.
Companies will be expected to consider implementing new measures that will allow them to maintain business-as-usual should the global pandemic continue to disrupt conventional working well into the future—and provide an assessment on how long that timeline currently is. Other functional reviews would include IT and security testing and remote working capabilities.
For more detail on how to meet expectations, keep compliant and manage under general Covid-19 restrictions, our Global Head of Financial Markets Paul Liesching, has written an article in Global Banking and Finance Review on how the financial sector can navigate the ‘new normal’.
