Consumer protection supervision drives largest rise in regulatory pressure, says KPMG

The FCA’s scrutiny of its flagship consumer duty reform has increased the regulatory pressure felt by financial firms in 2024, according to KPMG UK’s latest Regulatory Barometer. The regulatory impact score in this area has risen from 6.8 to 7.4 (out of 10) since March 2024. Meanwhile, the regulatory impact score for payments also increased from 6.8 to 7.1 since the last Barometer, driven by continued attention from policymakers and regulators on improving payment infrastructures in a bid to drive competition and innovation, and strengthen consumer protection. The score for digital finance also increased from 6.9 to 7.3. More stringent rules around the marketing of crypto assets, such as better risk warnings and 24 hour cooling off periods, have all contributed to the change. The update comes as the FCA faces questions from the public about its latest annual report. The key focus areas of the report outline the work undertaken by the regulator to protect consumers and deliver good outcomes for them, via its Consumer Duty reform. Despite these developments, the most significant, and continuing, regulatory burden for financial services firms comes from requirements to maintain and strengthen financial and operational resilience – both score 8.1 in this edition of the Barometer. Across both themes, major policy initiatives are being finalised, implementation deadlines are approaching and there will be correspondingly high levels of supervisory intensity. While ESG and sustainable finance remain high on the regulatory agenda, KPMG reported a slight drop-off in regulatory intensity, with the regulatory impact score falling from 8.4 to 7.9. This reflects a slowing in publication of new policy, following several years of concentrated activity and while reviews of existing policy are progressing. Philip Deeks, head of KPMG’s Regulatory Insight Centre, said: “UK firms have really felt the weight of the Consumer Duty over the last six months as the reform has shifted from policy interpretation and implementation to high supervisory intensity. “The uptick in regulatory pressure partly reflects the mammoth task firms faced as they raced towards the July deadline of compiling the first annual Consumer Duty board report and meeting obligations of their closed books.” He added: “However, it is the pace and intensity with which the FCA has challenged firms for evidence of the outcomes they are generating that have driven most of the increase. The FCA has developed a keen appetite for data from firms. It has also moved quickly and been proactive in sharing its initial findings on how firms have implemented the Duty.

Consumer protection supervision drives largest rise in regulatory pressure, says KPMG

The score for digital finance also increased from 6.9 to 7.3.

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