Financial services regulation and COVID-19 video diaries

Financial Services Regulation and COVID-19

Jonathan Herbst

Global Head of Financial Services

Well hello everybody. Welcome to this very first video –we are going to discuss from home some of the issues the FS regulators are looking at in relation to the virus. Firstly I wanted to wish everyone well and hope that everyone is healthy.

So turning to the matter in hand, there's obviously been a lot of material issued by the PRA and the FCA in the last week and to summarise it all, I would say it is about three of four key headlines.

Number one, firms need to be prepared as much as they can be. We are obviously in fast-moving times, but firms need to have a dynamic BCP, and general plan.

Number two, firms need to think very carefully about treating customers fairly. Obviously the initial focus has been in relation to retail clients, but it actually is a broader piece and one needs to think about professional clients and what you do and how you do close outs, how you call margin, etc. Now I do not want to go too far on that, but I think it is a point to be conscious of.

Thirdly, you will have seen the FCA's latest statements on reporting.  Interesting, it's obviously in relation to corporates but I think there is a more general message here for financial services firms which is that firms need to keep up to date with the developments as much as they can, keeping the FCA in the loop if they feel there’s a Principle 11 obligation or there is something specific they need to draw the FCA's attention to but otherwise they need to keep an orderly an audit trail in these difficult circumstances as they can.

Fourth, market conduct issues, as people need to keep thinking carefully around insider dealing and market abuse questions, and generally your control environment. There were some warm noises from the FCA in relation to understanding that controls may be something of a different type at the moment, but that is something firms need to keep very much up to date with their thinking.

And finally I would draw the attention of everybody really to the prudential side. The Bank of England and the PRA have made a number of statements in particular, around counter cyclical buffers and various other things. I think one has got to be slightly careful of going too far in interpreting these, it is good that there is some flexibility, but fundamentally if you are the senior manager, who is either the CCO or a board director or CEO, I think you need to be thinking very carefully around formal compliance and so I think a lot of the judgment calls here are going to be around the extent to which you think about notifications, the extent to which you keep your audit trail, and frankly how you deal with all the various interests, creditors, employees and customers. And what we are going to do is a series of these videos, where we are going to dive into the detail on every one of those areas and others, so thank you very much and welcome to our series.