So – we’re into the new tax year already. It creeps up on us because not that long ago we were celebrating the New Year. Now we’re celebrating a new tax year; or perhaps celebrating is too strong a word. Either way, we as an industry are having to embrace another tax year, with all the changes that it brings.
More than just tax allowances
Of course, there is the obvious stuff that happens every year on 6 April, such as revised tax allowances and usually extra duty on beer! But this tax year (2015/16) has been notable not just for changes in the pension regime (which have been covered in enough detail previously, and are now being dealt with for real) but for a whole raft of regulatory changes. In fact, the amount of change that’s going on in the overall regulatory environment at the moment is simply jaw-dropping. And it’s all happening in a very short space of time too.
So, just as individuals try and make New Year resolutions that they will keep, in the same way, firms and individuals in financial services need to make the right resolutions too. There isn’t much time to implement these changes, and resources will no doubt be stretched. So they have got to be right. Here are three suggestions.
Resolution 1: To get to grips with all the pieces of regulatory change that will impact the firm between now and April 2016.
This is a tough challenge for compliance teams at the moment, because change is coming at them left, right and centre. Both the FCA and the PRA were extremely active in the months leading up to April, with a raft of consultation papers and policy statements. But it’s not just the UK where change is coming from, there’s Europe too. And if you happen to be a multi-faceted business (for example a bank with an insurance arm), then the trick is to pick out the pieces that are relevant for each area of the business.
If you want an idea of the amount of change that’s on the horizon, then take a look at the list below. This is by no means exhaustive, and is only designed to give you a flavour of what’s going on.
Changes to the complaint handling regime
From 2016, firms will need to make changes to both the way that they handle complaints and to the way they report them too. These will require changes to both processes and IT systems. And before all that happens, there may need to be changes to notifications to complainants to line up with the changes being introduced in July as a result of the Alternative Dispute Resolution Directive.
The big one for insurers, and there’s not long left now. Firms will most likely be in the later throes of their preparations, both from the point of view of their capital calculations and their public and regulatory disclosures too. And from next January, most of the requirements will go live.
Senior managers regime for banks and insurers
Much talked about in previous blogs I know, but rightly so. This is big. Especially for groups including both banks and insurers! This requires an entire overhaul in the current approved persons and fitness and propriety processes. Throw into the mix the need for an enhanced governance framework required under Solvency II for insurers (including key function holders) and you have a huge piece of work on your hands – all to be implemented before the end of the tax year!
The first part of the work for the UK’s biggest banks has already started and culminated in plans being submitted to the PRA in January. Yes, these banks have until the start of 2019 to set up their ring-fenced operations, but I suspect they will be flat out between now and then working through their plans.
EMIR – mandatory clearing
For firms trading interest rate swaps, the mandatory clearing requirements look like they’re going to take effect for bigger firms during the first part of 2016. Work will be needed here to establish new clearing relationships, as well as potentially some reshaping of derivative contracts from a price perspective.
Independent Governance Committees and Trustees
Affecting insured group personal pension schemes and master trust arrangements respectively, the former is a requirement now, and the latter has an ultimate delivery date in July. The need to appoint an independent committee or extra trustees is likely to be quite intensive to begin with and then require extra governance thereafter.
I could also mention the potentially new Scottish rate of income tax, the introduction of MiFID II and the 4th Money Laundering Directive, all of which will be looming large in our mirrors when 2016 starts. And there’s more too, but I’m running out of space.
Resolution 2: To identify those pieces of change where action is definitely required.
On occasions this can be quite tricky. But it’s essential that everyone knows which pieces of change are in scope for their firms, and which ones definitely require action. Because without this key step, it’s impossible to know the extent of the resources required to deliver the changes, particularly if they need to be acquired externally.
Which brings me neatly on to the third and final resolution.
Resolution 3: To identify all relevant training needs and make sure they’re taken care of.
It’s easy to just write that people need training because there’s lots going on. But actually it’s more important than that – it’s crucial.
Unless there are trained and skilled people in the firm who keep their knowledge up to date, how can that firm expect to deliver the changes effectively?
For example, how can the revised complaint handling requirements, particularly when treating more complaints informally, be delivered if the call handlers don’t understand what they have to do?
How can insurers deliver the reporting and capital figures if their staff don’t have enough knowledge and insight into the detailed requirements?
And how can banks and insurers deliver the approved person changes if no-one in the firm knows exactly what they are?
All of these things (and more) mean that the pressure to maintain personal development will become more intense than ever. But with day jobs to do as well, how can this be sourced efficiently?
With time pressures becoming greater, not only does training have to deliver better value all the time, so do the means of sourcing it. That’s where Industry Events Online comes into its own. Take a look for yourself if you don’t believe me.
By Martyn Oughton a Professional Member of the International Compliance Association (ICA). Martyn now writes a regular blog for Industry Events Online focusing on the importance of training in all aspects of compliance. Read Martyn's other publications at Martyn's Writers' Residence website.
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