It’s nearly 6 months since the Chancellor challenged key regulators to ‘tear down the regulatory barriers’ that hold back economic growth. This week however, both the PRA and FCA used the recent BSA conference to announce major reforms. It is becoming clear there is a regulatory will to satisfy Government demands, but will the loosening of controls see a return to the slack standards seen before the global financial crisis?
Choosing the BSA conference to announce the reforms was more than significant. Speakers from both regulators referred to the fact that the conference was celebrating 250 years of building society support for homeowners. They also took the opportunity to take stock of the past and look forward to a future world where regulation allowed firms to grow safely rather than hindering them.
- PRA consults on “the retirement of SS20/15”: This sourcebook has safely controlled building societies’ treasury and lending activities for a decade. Deciding to consult to withdraw it will have a significant impact. The regulator thinks it will enhance competition and support growth in the UK, but as the sourcebook was originally introduced to achieve alignment between risk appetite and risk capability in building societies following failings identified in the financial crisis, there are those who fear a return to reckless decision making. The PRA takes a different view; that it has plenty of other appropriate supervisory tools such as ICAAP, ILAAP and operational resilience requirements.
- FCA consults on “sweeping change to make meaningful adjustments to support the industry and consumers”: There will be two consultations in 2025. The first will consider how to make it easier for consumers to remortgage or consider options with an existing lender. The second will be wider ranging and consider the future of the mortgage market and conduct regulation. The industry is keen to support innovation that drives growth but is adamant that this should be done in a logical and sustainable way. The FCA takes another view too; that Consumer Duty will drive the right lender behaviours, without the need for onerous regulations.
While ‘de-regulation’ to stimulate growth is high on the UK agenda, the Basel Committee on Banking Supervision has just updated its “Principles for the management of credit risk”. These look robust and prescriptive.
As a result, there is a lot to consider. I will be exploring the inherent risks of regulators potentially ‘caving in’ to political pressure on the spotlight stage at Global ABS in Barcelona. The session will take place at 14:30 on Wednesday 11 June. Joining me on the day will be Andy Vickery, Global Head of Finance at Linklaters LLP. It is sure to be a lively debate, so we hope to see you there.
Rockstead is one of the UK’s most trusted providers of governance, compliance and regulatory services. We help clients in regulated Financial Services markets grow safely and safeguard firms from foreseeable harm. Our people are experienced subject matter experts, and we continue to provide independent support and oversight on these and other risk matters. Whether a funder, investor, lender or asset manager in the ABS sector, we look forward to showcasing what we do.
P.S. Book to meet with us at Global ABS via appointments@rockstead.co.uk – get in touch before the diary fills up!