Last updated: 14 Oct 2024 12:00 Posted in:
KPMG UK’s latest Regulatory Barometer has found that the greatest increase in regulatory pressure stems from requirements to comply with consumer protection regulations. The regulatory impact score in this area has risen from 6.8 to 7.4 (out of 10) since March 2024.
The report found that increased FCA scrutiny of how firms ensure good customer outcomes, driven by flagship Consumer Duty reforms, is resulting in significant increase in regulatory pressure.
Philip Deeks, Head of KPMG’s Regulatory Insight Centre, said: “UK firms have really felt the weight of the Consumer Duty over the last six months as the reform has shifted from policy interpretation and implementation to high supervisory intensity. The uptick in regulatory pressure partly reflects the mammoth task firms faced as they raced towards the July deadline of compiling the first annual Consumer Duty board report and meeting obligations of their closed books.
“However, it is the pace and intensity with which the FCA has challenged firms for evidence of the outcomes they are generating that have driven most of the increase. The FCA has developed a keen appetite for data from firms. It has also moved quickly and been proactive in sharing its initial findings on how firms have implemented the Duty. Consequently, firms are feeling the pressure in responding to supervisory demands while simultaneously re-calibrating and enhancing their approach to the Duty.”
He added: “Now that the Duty has been fully implemented, some firms may be breathing a momentary sigh of relief. However, we do not expect intense supervisory pressure around consumer protection to ease off as the Duty and regulatory expectations around it evolve.”
Regulatory pressure is also building in other areas which impact consumers, with the score for digital finance rising from 6.9 to 7.3. More stringent rules around the marketing of crypto assets, such as better risk warnings and 24-hour cooling off periods, have all contributed to the change. Firms also need to start preparing to meet the obligations of the EU AI act, which will apply fully in less than two years, the report said.
Despite these developments, the most significant, and continuing, regulatory burden for financial services firms comes from requirements to maintain and strengthen financial and operational resilience – both score 8.1 in this edition of the Barometer.
KPMG UK’s latest Regulatory Barometer is a twice-yearly measure of the regulatory pressure faced by financial services firms in the UK and EU.
The FCA has developed a keen appetite for data from firms. It has also moved quickly and been proactive in sharing its initial findings on how firms have implemented the Duty. Consequently, firms are feeling the pressure in responding to supervisory demands while simultaneously re-calibrating and enhancing their approach to the Duty.”
Philip Deeks, KMPG, Head of Regulatory Insight Centre