Regulation in the time of Covid: Part 3 (89) 20/5 - Thoughts on the Consumer Duty CP (TCF) (2/5)
Gavin Stewart
Writer, Commentator on financial regulation; Former regulator; Ex-international rower & Sports Administrator. My latest novel, "An Endless Chain", can be ordered at Olympia Publishers, as well as via Amazon and Foyles.
Starting on 16 March last year, I began writing daily blogs about the impact of the Covid crisis on financial regulation. Other issues, notably Brexit and digitisation, have featured as well but Covid remains the dominant driver of regulation as we enter 2021.
A key area of the consultation paper is whether the new Duty should replace two of its existing Principles for Business (6 - TCF and 7 - Information needs) or sit alongside them. I won't go into the detailed argument here (see paras 3.33ff) but in general terms the FCA sees the Duty as not applying to all firms (unlike the existing principles) and as overlapping with the existing principles not replacing them. It also believes that the detailed language in the Handbook that is based on Principles 6 & 7 would still support the new "more developed" rules.
There is also the question of whether the existing TCF outcomes should be disapplied. These have a long and undistinguished history, going back to 2006, which is neatly summarised by Charles Randell (FCA Chair) in a recent speech. Complicating the issue, the key problem, that they essentially measure inputs and process not outcomes, was identified at the time but more sophisticated metrics were rejected as too difficult/expensive. This dilemma hasn't gone away and will surface again as the FCA looks to measure its four new outcomes.
Some readers will remember that the TCF outcomes originally led to the FCA asking firms to submit relevant Board MI so they could evaluate it against the outcomes. This was a massive exercise that generated forests of paper; it proved predictably inconclusive and eventually was quietly shelved. To have a realistic chance of success, the FCA will have to find imaginative ways of evaluating the new outcomes, ways that don't default into more paperwork.
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