FCA’s Expectations on Financial Resilience and Professional Qualifications

    

The FCA wants to see firms operating in this challenging period and are providing some flexibility to regulated firms to ensure continuity. Last week the FCA published an updated statement regarding expectations for solo-regulated firms and this week extended the time limit for obtaining appropriate professional qualifications.

The regulator expects firms to plan and to ensure a health management of all financial resources. This means taking appropriate steps to conserve capital, and to plan for how to meet potential demands on liquidity.

The key points of the statement include:

Capital and liquidity buffers are there to be used in times of stress. Firms that have been set buffers can use them to support the continuation of the firm’s activities. If a firm is planning to draw down a buffer, it should contact the FCA or its named FCA supervisor.

  • The use of buffer is allowed to support the continuation of the firm’s activities. Adding to this statement, the FCA highlights that if a firm is planning to draw down a buffer, it should contact the FCA or its named FCA supervisor;
  • In case the firm intend to exit the market, it should consider all the steps to reduce the harm to consumers and market, in these cases planning is essential;
  • The regulator expects firms and their boards to satisfy themselves that each distribution is prudent given market circumstances, and consistent with their risk appetite. The FCA would not expect firms to distribute capital that could credibly be required to absorb losses over the coming period; and
  • Non-bank lenders subject to IFRS9 are reminded that the standard requires that the forward-looking information used in expected credit loss estimates is both reasonable and supportable.

In another update, on the 20th of April, the FCA provides further information on how firms can comply with requirements to ensure that their employees complete appropriate qualifications during the COVID-19 pandemic. It is well known that accredited bodies and professional qualification providers are cancelling or postponing exams because of COVID-19 pandemic.

However, the FCA still requires that employees have skills, knowledge, and expertise in order to do the work and their responsibilities. For the moment, the FCA will not take actions against firms that doesn’t have employees with an appropriate qualification/certification in a period of 48 months due to current cancelations of exams.

In addition, all affected employees of the firm will have an additional 12 months to complete the certification if needed. In these cases, the firm will decide if an extension is needed and grant it to the employee. Nevertheless, the FCA highlights that the 12 months extension must have a reason and it must be documented.

The extension approach will be adopted by the FCA for 6 months, until 31 October 2020. This means that firms may apply a time limit of up to 60 months where examinations were cancelled or postponed, up to and including 31 October 2020.

For more details on the FCA latest statements, please visit FCA.org.uk

 

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