COVID-19 - Likely impact on regulators (92)

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...

In a couple of weeks' time, on 31 July, I'm going to bring this series of blogs to a close at a round 100. I'll pick up again on 31 August with a round up of that month's developments and their implications for regulation,and then take it on from there.

Even before Charles Randell's speech last month, it was obvious that the FCA would need to have a reset post-crisis and that, as a necessary prerequisite of this, it would need an effective exit from the temporary Covid-related regulations - on mortgages and consumer credit - it had already put in place. This exit has only become more important in the month since, and managing the outcome of its BI Insurance test case, which began yesterday, has emerged as a further dependency.

I've already written extensively about the high degree of uncertainty the FCA has introduced by choosing this legal route. Before doing so, it will have consulted closely with the PRA, and the wide range of legal arguments already being deployed serve to highlight the prudential considerations involved. A further factor is the duration of a legal process that will likely extend into 2021, with the initial decision due September at the earliest and an appeal to the Supreme Court almost inevitable whatever way it goes.

The FCA's incoming CEO, Nikhil Rathi, was already facing a perfect storm of Covid, Brexit and the challenge of modernising the FCA's operating model which was effectively set out in Charles Randell's speech. To add to this, it is becoming harder to see an outcome to the legal case that doesn't create a major problem either for insurers of for small businesses. The reset the FCA's Chair is looking for is starting to look more optimistic.

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