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What Can We Expect From the New Head of the FCA?

What Can we Expect From the New Head of the FCA?

Chancellor Rishi Sunak overlooks Chris Woolard and chooses Nikhil Rathi to take the FCA forward into the post COVID-19 world.

There’s a new face at the FCA, but it’s not the man most expected. After a relatively positive stint as interim Chief Executive, Chris Woolard had been favourite to take the role on permanently. However, the decision to shun him in favour of Nikhil Rathi, boss of the London Stock Exchange, could have a number of implications for the future direction of the regulatory watchdog.

Woolard shunned

Woolard had been busy during his time as interim boss. He took on insurers who attempted to shirk responsibility for business interruption cover, he brought in his own QCs and hired law firm Herbert Smith Freehills to help the regulator deal with legal complexities and launched an inquiry into sub-prime lender, Amigo.

However, there is a sense that the FCA needs to be shaken up after the Woodford savings crisis, its failure to pre-empt the London Capital & Finance mini bonds scandal and the slowness of its response to malpractice in the investment sector.

Rathi, by contrast, is an outsider to the FCA and may bring a much needed freshness to the role while his track record of working in the Treasury may also have played a role in Sunak’s decision. Certainly his time at the Treasury may well help him to handle some of the upcoming challenges such as Brexit, although others may fear it makes him a little too close to Government.

The coming years will bring a number of challenges which could create friction between the FCA and Government. Rathi will do well to ensure he is seen to keep his employers at arm’s length and avoid any implication of political influence.

What to expect

As he takes his role, Rathi arrives at a pivotal time. The COVID-19 crisis has placed an enormous pressure on the FCA in maintaining its operations. It has already had to reset its priorities to ensure it can maintain the right focus despite the restrictions of the pandemic.

The financial world faces winds of change in the shape of new technology, climate change and a desire for greater accountability and better conduct. Each of these issues were front and centre of his attention as he set out his goals for the future.

The regulator also is fighting for its reputation. It has faced considerable criticism over the past few years and, like other regulatory watchdogs around the world, is under pressure to improve oversight and accelerate the conduct of cases. Rathi will need to hit the ground running and show that he can steer the regulator through the choppy waters which are on the way.

EBA Updates Guidelines for COVID-19 - Waymark Tech Blog

EBA Updates Guidelines for COVID-19

The European Banking Authority has issued a new set of guidelines updating its approach to COVID-19, including issues of default, regulatory requirements and recovery planning.

The coronavirus pandemic has sent ripples of shock waves across the economic and business landscape affecting how businesses can maintain operations as well as sparking increases in defaults. Regulators have been issuing guidelines about how they will mitigate such effects, the latest of which comes from the European Banking Authority which has provided updates on risk, supervision, flexibility and moratoria on loan payments.

Moreover, the EBA has provided further clarity on its attitude to how flexibility will guide supervision in market risk, recovery planning, digital resilience and the Supervisory Review and Evaluation Process (SREP).

Here’s a quick look at what these guidelines are and what lessons firms should take…

To mitigate the impact of exceptional volatility triggered by COVID-19, the EBA proposes to adjust the capital impact and amend its standards on valuation. Among other things it will introduce is a 66% aggregation factor which will be applied on 31 December 2020.

Flexibility

The challenge of COVID-19 is having a considerable impact on firms and the EBA is making allowances. There will be a more pragmatic approach to SREP assessments in 2020 which will focus on the most serious material risks created by the crisis.
It will also delay reporting on the first FRTB-SA figures to September 2021 in recognition of the impact the pandemic is having on businesses and will offer greater flexibility on prudential requirements for competent authorities for banks using internal VAR models.

Recovery planning

The next issue is how businesses will recover. This is a highly fluid situation and no organisation is entirely certain about what recovery plans will look like because they still don’t know the full scale of the challenge. The EBA says the focus should be firmly on understanding which recovery options are necessary and can be applied under the current high stress conditions.

The EBA has also provided clarity on the prudential application of default and forbearance whether in the form of postponement of payment or interest of a credit facility granted by a bank to a borrower in financial distress.

The EBA has clarified that a payment moratorium which abides by the guidelines will not lead to a reclassification under the definition of forbearance, banks should still categorise such exposures as “performing” or “non-performing” according to the applicable requirements. Banks should also assess each individual’s repayment capacity and set up tailored specifications where necessary.

Maintaining resilience

Key to this is digital resilience. As we’ve covered elsewhere, technology is coming to the fore in this crisis. It will create complications and opportunities for businesses looking to ensure digital operational resilience. The regulator says that businesses, will have to ensure business continuity, adequate ICT capacity and security risk management to ensure they can maintain the integrity of systems and continue to offer value and protection for clients. Financial institutions will be able to use the new EBA ICT and security risk management guidelines to focus on priority areas.

The crisis is, and will, have an unimaginable impact on the financial sector. In setting out these guidelines the EBA seeks to ensure allowances are made and to guide businesses through the process of appropriate recovery plans.

Could Coronavirus Accelerate Digital and Regulatory Transformation? - Waymark Tech Blog Post

Could Coronavirus Accelerate Digital and Regulatory Transformation?

COVID-19 is already having a disruptive influence on our economy. The changes we’ve seen in a few short months have been profound. Business is being forced to become more mobile and to embrace digital technology – quickly. While concerns about the impact of new technology will remain, and companies must ensure they do not create unforeseen risks, the pull of the new has just become a whole lot stronger…

In the middle of December, an AI system detected a clutch of unusual pneumonia cases centred around a wet food market in the city of Wuhan. Nine days later the World Health Organization alerted the world to a dangerous novel form of Coronavirus; in the new year it had a name: COVID-19.

AI had already proved itself to be valuable in the fight against COVID-19 – and it could be critical as the financial sector seeks to recover.

The system, BlueDot, was designed precisely for this kind of situation. It was originally inspired by the outbreak of SARS in 2003 which killed nearly 800 people around the world and cost the world economy $40bn. As its founder, Kamran Khan said:

“What I learned during SARS is, let’s not get caught flatfooted, let’s anticipate rather than react.”

Kamran Khan – Founder, Bluedot

BlueDot relies on big data to anticipate and conceptualise the spread of infectious diseases. It uses data from public health organisations, digital media, global airline ticketing systems and various other sources to predict how quickly a disease might spread, and where hot spots might occur. Using this data, for example, they were able to predict which cities had the highest connectivity to Wuhan and which would experience the first cases.

The system could have been used to help inform governments about their responses, and also give companies advanced information on how COVID-19 was likely to spread. This would have assisted them to make preparations in advance.

Time for AI

Already, financial institutions have been using artificial intelligence across operations from customer service and algorithmic trading to cyber security and much more. All these applications have potential benefits in helping the world to cope with a “COVID-19 economy”.

Chat bots and AI call assistants might spring to mind, but they represent only the thin end of the wedge. They can answer most simple questions, improve response times for callers and take the load off call centres. S-Bank, for example, has managed to automate 70% of all calls without intervention from a customer services representative.

But what about the more involved applications of artificial intelligence that most haven’t even considered where lies immense value?

Take, for example, the vast swathes of information currently being published around this pandemic and the numerous regulatory updates coming out from the regulatory bodies. It’s impossible to assimilate it all and apply it without working 24/7. Even then, it wouldn’t be doable. With the application of AI in this instance however, it is possible to intelligently “cherry pick” the pertinent information, successfully discerning it from the irrelevant data and being able to access it in an easily digestible format. Not only does this save time but adds enormous value to clients of all types of businesses and within a range of sectors.

But that’s still just scraping the surface of AI’s capabilities in these use cases.

Financial institutions may also turn to AI to safeguard their businesses during uncertain times. As recent Office for Budget Responsibility figures show, the impact of the lockdown could be unlike anything we’ve seen since the Great Depression. Stock markets have gone into meltdown and even the most experienced analyst will struggle to accurately predict what’s going to happen to the economy or to the markets over the next year.

Businesses in all sectors will need to be much more aware of opportunities and AI systems are likely to prove helpful to them. Investors will be able to identify emerging trends earlier, companies will be able to take appropriate positions and thereby be enabled to take a more central role in everything from financial management to cyber security, keeping systems ticking over and alerting management to potential problems a lot earlier.

Regulatory Hurdles

But what about the regulatory hurdles? Given this extremely uncertain time, it has never been more difficult to stay up to date with all the regulatory changes and the new information constantly being released. A week now feels like a year in “normal” times. On the one hand, artificial intelligence can expedite reporting requirements and make it easier for firms to demonstrate compliance, but on the other, less human involvement could potentially reduce oversight and may make it more difficult for firms to ensure the “robots” are behaving appropriately.

Well actually, no.

With the pressures of lockdown and the speed in which the pandemic overtook our world, demand for more advanced solutions has grown significantly and pressure is being placed on regulators to develop frameworks that facilitate the sustainable and safe growth of AI solutions.

This is where AI-as-a-Service comes in and can benefit these businesses. From uncovering connections and patterns in vast, unstructured datasets to improving the way that new regulations are introduced in the future. These, along with insightful analysis are just some of the ways that advanced artificial intelligence solutions are helping businesses to navigate these troubled times.

Financial Conduct Authority Updates Action on Coronavirus - Waymark Tech Blog

Financial Conduct Authority Updates Action on Coronavirus

As the UK goes into lockdown the FCA continues to update its guidance and work out how it can support the financial sector and those who rely on it through what is now undeniably, an unprecedented crisis. With questions about trading practices, vulnerable customers and reporting, the FCA has issued a series of statements over the past few weeks outlining its expectations.

Short selling

The FCA has not followed the examples of other countries such as Italy and Spain in banning short selling. Both countries have banned the practice in order to counter market volatility as the virus spreads across the world. Experts in the US have also argued strongly against short selling. However, the FCA claimed there was no evidence that it was behind the recent turmoil in the market. Indeed, they said short selling remains a useful tool in investment strategy, allowing companies to manage risks by taking long and short positions.

Vulnerable clients

Its work on vulnerable clients has been shelved as it postpones all non-essential work in the face of the pandemic. Publication of its guidance on vulnerable customers will be placed on the back burner for the time being.

However, the FCA has stepped up pressure to prevent repossessions in the fallout of the crisis. The regulator’s guidance says lenders should offer a three-month payment holiday in the face of the spreading pandemic. It should be granted where homeowners are experiencing payment difficulties because of COVID-19. This can apply where a customer first asks for leniency or if a lender feels they qualify for a break. The Government has said there is no expectation under its guidance for a lender to fully investigate the circumstances surrounding a request for a payment holiday.

“We are making it clear that no responsible lender should be considering repossession as an appropriate measure at this time.”

Christopher woolard, interim chief executive of the fca

Delayed disclosure

The FCA has urged companies to delay publication of their preliminary results for at least two weeks.

“The unprecedented events of the last couple of weeks mean that the basis on which companies are reporting and planning is changing rapidly.”

Financial conduct authority

Companies, it said, should give due consideration to the impact of the virus and that the events of the last couple of weeks meant that time tables set before the virus would mean there would be little time to achieve this.

It says it is in talks with the audit regulator, the Financial Reporting Council (FRC) and the Bank of England’s Prudential Regulation Authority (PRA) about a package of measures to ensure companies take time to prepare appropriate disclosures. The FRC, for its part, has also asked companies to delay disclosing financial reports rather than produce substandard audits.

This is uncharted territory for the entire sector. The FCA’s role in this is to reduce turmoil as much as possible and put pressure on companies to maintain sustainable and responsible policies which do not cause additional stress and anxiety to their customers.

Climate Change Regulation is Coming - Waymark Tech Blog

Davos: Like it or not, Climate Change Regulation is Coming

As the Doomsday clock ticked closer to midnight, scientists had a very stark message for world leaders gathered at Davos. “Pull your finger out” or we’re all doomed. The world is in the last chance saloon if it is to prevent catastrophic climate change. Only a major transformation will turn things around…

All of which will have enormous implications for every part of society, especially finance. This sector will find itself at the forefront and will come under pressure from all quarters to become more sustainable – it already is feeling the pressure.

At Davos, some of the world’s largest companies including the Big Four accounting firms signed up to the most comprehensive set of sustainability standards yet.

The EU’s Taxonomy for sustainable economic activities was published in December and will form the basis for the EU action plan. There will be standards for green bonds, eco labels for sustainable funds and transparency on how much of a firm’s activity comes from sustainable activities. It will establish benchmarks to help investors understand the impact of their capital and introduce obligations for institutional investors.

In the UK, outgoing Bank of England Governor Mark Carney has been appointed to advise the government on climate change ahead of the UN summit. The FCA says it is taking measures to address greenwashing, and the Taskforce for Climate Related Financial Disclosures has made recommendations encouraging companies to improve their reporting on sustainability issues.

Larry Fink, Chief Executive of Black Rock has said he will be demanding more clarity in sustainability reporting from the funds he invests in.

“Investors can no longer ignore climate change,” he writes in a 16-page report. “Some may question the science behind it, but all are faced with a swelling tide of climate-related regulations and technological disruption.”

Change is coming, whether firms like it or not. Customers demand it and governments will insist on it. As we’ve reported elsewhere, sustainability is fast becoming a regulatory issue as well as an ethical one. Those who get out ahead of the curve will find themselves at a competitive advantage, as KPMG recently forecast.

In their response to the EU Sustainable Finance Paradigm, they said: “Those with highly-developed sustainable investment processes and an offering that resonates with the preferences of responsible asset owners will likely gain a competitive advantage over their peers.”

There is a growing realisation that climate risk should be considered alongside economic risk. For example, investing in firms which engage in environmentally harmful activities could become risky if governments seek to curtail their activities. The push towards renewable energies could reduce the performance of oil and gas companies.

Reporting will come under the spotlight. Firms will face pressure to incorporate sustainability issues in their company reports and to demonstrate what measures they are taking to improve performance.

Buy-in will be vital from all workers. Corporations will need to establish a clear set of principles and ensure everyone adheres to them, providing clear accountability and reporting at every stage.

From both a commercial and regulatory point of view, the pressure is on for a greener and more sustainable financial sector. The smart money is on those companies that act now and get ahead of the game before they become mandatory.

How should firms adapt for AMLD5 - Waymark Tech Blog

How Should Firms Adapt for AMLD5?

New anti money laundering legislation has arrived and firms will have to move very quickly in order to comply if they have not already. Those that do not, will be unable to plead ignorance. Even so, many are lagging.

On 10th January, the Government introduced its Fifth EU Anti-Money Laundering Directive (AMLD5). It’s an update of existing legislation so it doesn’t involve a massive overhaul but firms still need to take immediate action to ensure they are compliant.

What’s new?

The new regulation will enhance the powers of the EU financial intelligence units and increase transparency around company trust and ownership using beneficial benefit ownership registers. It will also prevent risks associated with the use of virtual currencies for financing terrorism and enhance access to information for financial intelligence units.

Specific and complete identification of real holders of passbooks, bank accounts or e-wallets must be provided. Until now, they could be anonymous. The required subjects list has been expanded, particularly taking us into the realm of digital currencies. The registration processes of holders and trusts will also be expanded.

Electronic sources

With the new regulation coming so quickly after Christmas there isn’t much time to get ready and it’s easy to see how some companies might get caught out. Of all the changes, it’s the requirement for electronic documentation, where possible, which might cause the most problems.

The legislation states:
“(19) Information may be regarded as obtained from a reliable source which is independent of the person whose identity is being verified where […]
(a) it is obtained by means of an electronic identification process, including by using electronic identification means or by using a trust service (within the meanings of those terms in Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23rd July 2014 on electronic identification and trust services for electronic transactions in the internal market(11)); and…
If you do not have a reliable way of obtaining documentation which meets these standards, you’ll have to develop it quickly. “

Due diligence

When deciding on due diligence, firms will have to consider a number of risk factors, such as transactions from high-risk countries, if the customer is the beneficiary of a life insurance policy, a national of a third country seeking residence rights or if businesses relationships are not face to face. If a transaction is related to oil, arms, precious metals or tobacco products they will also have to take more care.

To cope with these new demands, firms will have to enhance their due diligence checks and install AML training for all staff. You’ll also have to use electronic verification wherever possible, although paper-based checks may still be available in some circumstances such as if they have been provided by the client from electronic sources. While the changes to AML5 are far from exhaustive, they do require a significant adjustment, some which are all too easy to overlook.

Five Lessons - Waymark Tech Blog

Five Lessons From SMCR

The Senior Managers and Certification Regime (SMCR) is finally upon us. After years of preparation, the FCA has finally rolled it out to virtually all regulated firms in the UK. Anyone performing a role designated by the FCA as a senior manager position will now be given designated responsibilities for which they are personally responsible.

With the rules now fully implemented, what can we learn from the FCA’s statements and investigations so far?

Convictions are difficult

Despite a number of investigations using SMCR powers, there has only been one high profile conviction when Jes Staley was fined more than £642,000 for failing to act with due skill, care and diligence in his response to a whistleblower in 2016. In a large firm, it is proving difficult to conclusively prove that one person should be held accountable for wrongdoing. The burden of proof is on the FCA which makes it difficult to secure a conviction but…

… Convictions may be higher for smaller businesses

With SMCR now extended to solo-regulated firms, that conviction rate could climb. While it can be impossible to prove personal responsibility in a large corporation it will be much easier in a smaller firm.

Firms should be proactive against non-financial misconduct

Non-financial misconduct will form part of the FCA’s assessment about who is a fit and proper person. In a Dear CEO letter Johnathan Davidson, Executive Director of Supervision, retail and authorisation wrote: “Following recent, publicised incidents of non-financial misconduct in the wholesale general insurance sector, I am writing to set out our clear expectation that you should be proactive in tackling such issues.” The FCA says it expects firms to identify what drives bad misconduct and, ‘modify those drivers’ to improve conduct.

Governance, governance, governance

As another Dear CEO letter highlights, this time from Marc Teasdale, the FCA is disappointed about standards of governance:

“Overall standards of governance, particularly at the level of the regulated entity, generally fall below our expectations. Funds offered to retail investors in the UK do not consistently deliver good value, frequently due to failure to identify and manage conflicts of interest,” he wrote.

A key issue, according to Teasdale, is liquidity management in open-ended funds. Liquidity, he said, should remain the responsibility of the asset manager even if outsourced to a third-party provider. While it is possible to delegate control, it is not possible to delegate responsibility.

SMCR is an opportunity

Much depends on how companies choose to perceive SMCR. Some will see it as simply being a compliance project, another box to be ticked in order to satisfy the regulators. However, it helps businesses get their governance in order. It includes all the things that companies should be doing in any case and helps companies highlight risk. Those who see this as a positive element of strategy are likely to see real benefits.

Smaller businesses are still getting to grips with SMCR. There may be bumps along the way, but every investigation, enforcement action and statement from the FCA contains lessons for the wider sector.

FCA Issues First Fine Against Claims Management Firm - Waymark Tech Blog

FCA Issues First Fine Against Claims Management Firm

The FCA has issued its first fine against a claims management company since it took over regulation of the sector eight months ago. It’s a finding which should signal the need for financial institutions to maintain the highest standards of transparency when communicating to customers.

Essex-based Professional Personal Claims (PPC) was fined £70,000 by the regulator for misleading branding and for submitting inaccurate or misleading claims to banks.

The FCA also believed that the firm was attempting to give customers the impression that they were making claims direct to those banks, when this of course, was not the case. PPC operated websites with the logos of five banks which contained their domains. The FCA said that this muddied the water of what customers might expect.

Customers could easily have been confused that the claims were being submitted directly to the banks rather than through a claims management firm in return for a fee.

“PPC’s misleading website and marketing material suggested PPC was associated with the five banks when this was not the case,” said Mark Steward, Executive Director of Enforcement. “Claims management firms must ensure their advertising is accurate. Not only in terms of what they say about themselves and their services but also in terms of what is represented.”

A lack of detail

The second charge is arguably just as damaging. People use claims management firms because they either don’t want the hassle of making the claim themselves or they aren’t confident they will fill out the forms correctly.

However, according to the FCA, PPC submitted claim forms to the banks which were either misleading or contained the wrong information.

The claims had already been made by the former regulator before the FCA took over, which had received 14 complaints about the company. PPC had originally challenged the finding in court, before withdrawing their claim in September leaving the FCA to adjudicate the penalty.

What can we learn?

This fine comes at a difficult time for claims management firms. The end of the PPI deadline leaves many people wondering what the future will bring for them. The FCA has only around 350 firms registering with them, compared to 700 during the height of the claims process.

The reputation of the sector is also extremely shaky. It has been blamed for misleading customers and also creating a compensation culture which has cost the banks billions.

If claims management firms are to go forward, the FCA, has served notice that it expects it to adhere to the highest standards of accountability and transparency. Advertising must be scrupulously accurate, communication must be clear and they will need to ensure all documentation is accurate, complete and correct. That might be something of an adjustment to a sector which has often thrived on ambiguity.

Before the deadline, the FCA had launched a high-profile marketing campaign to inform people about their rights and ensure they understood that they could make the claim themselves without using a claims firm.

Going forward they will have to ensure they are whiter than white, being clear about what they offer, how much they charge and that they are not affiliated with any bank or financial institution.

A Warning Not to retain Personal Information Longer Than Necessary - Waymark Tech Blog

A Warning Not to retain Personal Information Longer Than Necessary

Eighteen months on from Europe’s General Data Protection Act coming into force, the multi million Euro fines after starting to roll in. After major actions in the UK and France, Germany followed suit with a €14.5 million fine against real estate company, Deutsche Wohnen SE.
The fine in this instance relates to the company’s retention of personal data. In this instance, the Berlin DPA considered that the real estate company had retained personal data longer than necessary and that this amounted to a breach for three reasons.

  • The controller did not have a legal ground for storing this data longer than needed.
  • Article 25 covering data protection by design and default, and integrating safeguards into the processing in order to satisfy the rights of subjects.
  • Article 5 relating to the processing of data.

Deutsche Wohnen was found to have failed to establish a data retention and deletion policy which was compliant with GDPR for the personal data of their tenants. This was made worse by the fact that an audit had revealed problems in 2017 and that a second audit in 2019 revealed the company had still not managed to implement a GDPR compliant process because it still couldn’t demonstrate effective clean up of its storage or legal grounds for holding the data longer than necessary.


What can we learn


The DPA’s decision is not final and Deutsche Wohnen has already said it plans to appeal, but the ruling does offer a number of key lessons…

Europe’s regulators are getting tough: The slow start to GDPR enforcement led many to wonder if regulators were willing to resort to the full extent of their powers. We’ve now seen a number of fines from regulators in the million Euro bracket which suggests they aren’t shying away from large scale fines.

  1. Data retention is a problem: A common theme in fines is the legal basis for retaining data. Firms will need to ensure they have a clear legal justification if they continue to hold data for longer than is absolutely necessary.
  2. Data retention and deletion processes are crucial: All firms must have clear systems to archive and delete data. Deutsche Wohnen could have used one of a number of commercially available systems which allow it to separate data and apply different archiving and deletion rules.

This is also the first action to be taken under the DPA’s new guidelines for GDPR enforcement. These divide all violations into five categories:

Step 1: Companies are filtered based on their size.
Step 2: Average turnover is calculated.
Step 3: Daily rate is calculated by dividing average annual turnover of the undertaking for the previous year by 360.
Step 4: Establishing fine corridors which assess the perceived severity of the offence.
Step 5: Classification of the specific GDPR infringement.

Data protection authorities are all taking their own approaches to enforcement and fine calculation. This adds to the complexity of managing compliance as, although each one refers to the same regulation, authorities may always adopt their own individual stances.

This could become more complicated post Brexit. Although the UK has adopted the GDPR framework and will continue to do so after Brexit, future governments would be free to make changes in the future.

Going Green is Now A Regulatory Issue - Waymark Tech Blog

Going Green is Now a Regulatory Issue

This month, commuters in the city have spent much of their time dodging Extinction Rebellion protesters. The real pressure for change, though, is coming from the regulators.

The EU has led the way in developing a cross border framework to encourage a more sustainable financial system. The EU Action Plan for Sustainable Finance includes a taxonomy which would establish a unified classification for what can be considered sustainable activities.

The Commission sees this as the first step towards achieving a sustainable financial system and will follow it with:

  • Disclosures and Duties: Proposed regulation on disclosures for sustainable investment. This will introduce obligations for institutional investors and asset managers to disclose how they will integrate ESG factors into risk processes.
  • Benchmarks: A new category of benchmarks comprising low carbon and positive carbon impact benchmarks to help investors better understand the impact of their investments.
  • Amending regulations: The EU is also consulting on amendments to MiFiDII and the Insurance Distribution Directive to include ESG considerations into the advice that investment firms and insurance distributors provide to their clients.

These reforms aim to foster capital flows towards sustainable investment and to mainstream sustainability into risk management processes. They hope it will lead to better integration of sustainability into ratings, and research and clarify duties for institutional investors and asset managers.

Here in the UK we have the Taskforce for Climate Related Financial Disclosures which has made a series of recommendations encouraging organisations to improve the way in which they report on sustainability issues.

Just this month the FCA signalled that it was beefing up measures to ensure financial organisations are following the recommendations with measures designed to tackle greenwashing. In a statement it promised to consult on new rules to improve disclosures.

They recognise a problem. While the green finance market is growing, it is still relatively young and suffers from a lack of clear definition. This leaves the door open for greenwashing. Definitions of what is considered green varies from investor to investor.

Regulation, therefore, is coming from both international and regional levels. There is a growing recognition that climate reporting contributes to a more resilient financial system both among authorities and individual companies. For financial institutions, an improved stance on sustainability not only improves their corporate image but it can also reduce exposure to numerous climate-related risks.

Many are making changes voluntarily, but those lagging behind should take note. Climate-related regulation is coming, whether they like it or not. There will be more clarification on reporting requirements, green products, and obligations.

Those that have made the move early benefit on multiple levels. They can be seen as positive participants in the battle against climate change, they can access the growing sustainable investment markets and they can reduce compliance risks.

Sustainability is about to become an organisation-wide priority, from the boardroom to compliance teams and the trading floor. Firms can decide to make changes now or be forced to make them later. You can find out more detail about the coming climate-related regulations on our Global Regulatory Database. Link here: https://edb.enforcd.com/dashboard

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