COVID-19 - Likely impact on regulators (87)

We are in an uncertain situation, for which there is no complete playbook for regulators, though partial use can be made of some existing planning. As events move, this is the latest in a regular series of short blogs that aims to set out the likely path UK regulators will take...

One of the main themes of these blogs is the unusually high degree of uncertainty around the Covid crisis and its impact on regulation. In this vein, the FCA's Business Interruption Insurance test case starts on 20 July, and yesterday the FCA published its latest update, including the skeleton cases - the FCA's is +300 pages - and the Court's rulings from the case management conference on 26 June.

As a non-lawyer, it doesn't so far look like the FCA's attempts to control the scope of the case are meeting with much success. I particularly liked the Court's reference (Ruling 1) to "the Orient Express principle". Watch this space!

Of course, the greatest uncertainty relates to the virus itself and the risk of a second wave, highlighted in this report, poses a new set of problems for regulators. The FCA's temporary measures are due to expire at the end of October and a second wave would challenge this approach, with mortgage holidays and payment freezes potentially ending just as the relevant consumers are being made redundant. The point here is the level of uncertainty rather than the likelihood of the outcome.

Current regulatory powers are not remotely designed for a Covid crisis, and much of what has happened to date has been improvised and short term. If one of the more optimistic scenarios doesn't transpire, it's not clear what either the FCA or the PRA has left in the toolbox. So, again, watch this space!

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 We’ve developed a COVID-19 regulatory hub for financial services that we hope you will find useful.