At The GRC Network, our tradition for every new year is to set the tone with the key regulatory themes in the year ahead. We do this to highlight the areas that GRC professionals should focus on for the year and identify how these changes could impact work carried out in the regulatory space. 

Following an unprecedented year for UK regulated firms, the FCA used 2021 to advance regulatory initiatives with ESG, regulating Fintech and Crytpoassets and enhancing its supervision of conduct risks and individual accountability. The focus on these topics will not stop for 2022, and we expect them to be at the forefront of this year. In this month’s insight, we summarise the main regulatory themes we have come across.

ESG and Sustainability

With sustainability at the forefront of all topics these days with clients and stakeholders and the UK’s objective to be the world’s first net-zero country, we will see regulators increasingly use their powers and regulatory options to facilitate this transition. A core part of this will be climate-related and ESG disclosures that firms and companies must continue to grasp and comply with.

Operational Resilience (OR)

OR has been a common theme for the last three years. The first tranche of financial institutions’ OR requirements goes live on 31 March 2022. Operational Resilience falls into two parts: SS1/21, which focuses on an institution’s internal processes, and SS2/21, which focuses on third-party relationships and outsourcing. As the deadline looms, firms will aim to comply by the March deadlines, but the remediation work will continue for the remainder of 2022 as regulators prepare for heightened supervisory scrutiny.

Diversity and Inclusion (D&I)

D&I is not a new area of focus for the regulators, but it is taking on increasing importance and relevance. Given the global ESG agenda, pressure from customers and broader stakeholders is likely to drive greater change in the coming year too. The FCA issued a Discussion Paper to set out their initial thinking on the policy measures they might seek to introduce, and these will develop. Incoming regulations include the FCA’s policy statement on D&I on public company boards and committees and a Joint PRA and FCA consultation, with final rules coming in H2 2022.

Consumer Duty

One of the most significant changes for impacting attitudes is the FCA’s proposal for a new consumer duty. The FCA has consulted on its plans to provide a higher level of consumer protection in financial markets. By imposing a higher standard, the FCA aims to improve outcomes for UK consumers across all retail financial services markets by April 2023. The FCA plans to achieve this by introducing a new consumer principle that would require retail financial institutions to consider the likely outcomes consumers will receive throughout a product’s lifecycle.

AML legislative developments 

HM Treasury recently conducted a consultation regarding proposed amendments to the MLRs 2017. According to HM Treasury, the proposed amendments are required (i) to ensure that the UK meets international standards set by the Financial Action Task Force; and (ii) to strengthen and clarify how the AML regime operates. The changes will be made in Spring 2022, and HM Treasury will publish a full review of the UK’s AML and counter-terrorist financing regimes by 26 June 2022.

Crypto-assets 

Regulators around the globe are scrutinising systemic and consumer risks in cryptocurrency markets and grappling with a wide range of issues, including market conduct and AML/CTF concerns. While most jurisdictions have taken a cautious approach, some early movers have implemented or proposed bespoke legislative regimes to regulate cryptocurrency markets. 2022 will bring further regulatory developments in several jurisdictions, including the UK.     

Other areas of focus include FPR, Future Regulatory Framework Review, Appointed Representative Regime and Regulatory Divergence.