Financial Regulation 2021

Horizon report by Linklaters

In this report we cover the sweep of regulatory change affecting the financial services, with an eye on what’s coming next. Across the board we consider the consequences of UK and EU divergence, and the consequences of the pandemic.

Expectations and reality
The expectation was for a year shaped by Brexit preparations, with operational resilience occupying a strong second place given the continued ascent of FinTech and BigTech and some high-profile disruptions. But then Covid-19 came to Europe, with its far-reaching impact on the financial services sector, its markets and the wider economy it serves.

Impact of Covid-19
Nearly every programme of regulatory change has been impacted: the “working from home” model with market conduct, conflicts, SMCR, governance and control implications; forbearance in the usually strict AML/ KYC space to get the rescue package quickly to those who needed it; the postponement of new rules on operational resilience, whilst the sector managed its own lived-through disruption; and a succession of “quick fix” changes to other requirements to facilitate market recovery.

Vulnerable Customers
Whilst many areas saw a short-term slowdown in regulatory change, not so for the fair treatment of consumers, and especially vulnerable customers. Access to cash, treatment of arrears and payment holidays in the mortgages, loans and credit space have been prioritised. The “TCF” agenda has been shaped by the needs of this group during the pandemic.

Operational Resilience
Of course, focus on operational resilience has not gone away. Delays to new rules have made way for response to the present disruption. The pandemic’s impact on firms has been and will be evaluated for its lessons learned on readiness and response to be built into the new framework. Whilst the pandemic is a different kind of crisis to that typically envisaged, it has provided its own case study for the effectiveness of business continuity planning and governance frameworks.

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