Financial Conduct Authority cuts back on new initiatives as it says Brexit prep will cost £30m

Rebecca Smith
The FCA has had to limit new initiatives as it focuses on Brexit preparation
The FCA has had to limit new initiatives as it focuses on Brexit preparation (Source: Getty)

The City watchdog said today it was limiting the number of new initiatives it takes on for the year ahead, saying Brexit is "inevitably the priority" in its business plan published today.

The Financial Conduct Authority (FCA) has also set out seven other areas of focus including tackling financial crime and firms' culture and governance.

Overall, the watchdog said it identified the need to spend £30m on Brexit plans, with £14m of that reabsorbed by delaying or reducing non-critical activity, and finding other ways to deliver regulatory requirements.

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It is plugging £16m into EU withdrawal work outside of its redeployed resources, saying it had upped the focus on coordinating and managing its Brexit work and had limited the number of new initiatives taken on in order to do so.

For the £16m, it plans to raise £5m of that through the fees it charges firms, with a focus on those most likely to be affected by EU withdrawal.

Another £6m will come from specific firms where it will recover the costs of implementing new regulatory responsibilities like passporting and on-shoring credit rating agencies, when the FCA has established the final costs and the number of firms affected.

The FCA said:

Although our annual funding requirement has increased by £5m to cover EU withdrawal work, we have still made difficult and challenging decisions about our priority activities across all business areas that are not related to work on EU withdrawal, including limiting the number of new initiatives we’ve taken on.

We recognise the particular significance of EU withdrawal on wholesale financial markets, investment management and the general insurance sectors, and our decisions have been driven by our recognition of the capacity of industry to absorb change.

In its business plan for 2018/19, the FCA said its priorities reflect the "high level of resource" it needs to focus on Brexit, given its impact on regulation and the firms the watchdog monitors.

It said the year ahead will be a challenging one for the regulator, and with Britain leaving the EU, the FCA said its priorities involve working with the government, ensuring an appropriate transition for EEA firms and working with regulated companies and monitoring the risks to its objectives.

The watchdog is also working on its operational readiness and coordinating with international partners on preparations. It will review the FCA handbook in light of legislative changes, looking at duty of care and the potential for increased automation, and make changes "where appropriate".

Alongside that work, it will focus on seven cross-sector priority areas, where it believes there is the greatest harm or potential for harm, and where intervention could have the greatest impact.

The FCA's seven priority areas for 2018/19
  1. Firms’ culture and governance which should produce outcomes likely to benefit consumers and markets
  2. High-cost credit
  3. Tackling financial crime, including fraud, scams and anti-money laundering
  4. Data security, resilience and outsourcing
  5. Innovation, big data, technology and competition
  6. The treatment of existing customers to ensure that they do not get less attention or receive poorer outcomes than new customers
  7. Long-term savings, pensions and intergenerational differences - reflecting the changing UK population and their financial needs

Andrew Bailey, the FCA's chief executive, said:

The business plan is an important way in which we are transparent about our priorities for the year. We recognise that this year we need to dedicate a significant amount of resource to withdrawal from the EU.

As a result, setting our priorities this year has involved a particularly rigorous level of scrutiny and challenge to focus on areas where we see the greatest potential for harm.

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