Postponement of the joint Bank/Financial Conduct Authority survey into open-ended funds

The Bank and PRA have identified a number of other prudential measures that they plan to adapt in order to alleviate operational burdens on firms at the current time

20 March 2020

This article was written by Christopher Walker. 

For those operating open-ended funds, the following areas will be of particular interest:

1. Delay of the planned joint BOE-FCA survey into open-ended funds

In light of 2019’s Woodford fund issues in relation to illiquid assets, the BOE and FCA were set to further review the potential liquidity mismatch between open-ended funds and the daily dealing practices that these investment vehicles have historically offered.

The joint survey, anticipated to cover approximately 300 funds, has now been delayed until further notice. The delay will also postpone the commencement of the FCA consultation which would have subsequently followed the survey.

At this time, some open-ended property funds are once again facing suspension in light of the market impact of Coronavirus. 

2. Supervisory programmes for individual firms

PRA supervisors will review work plans so that non-critical data requests, on-site visits and deadlines may be postponed if appropriate.

The PRA will direct its focus towards key consumer protection and stability measures, including the impact of COVID-19, and will continue to coordinate with regulators including the FCA during this period to mitigate the impact of coronavirus on the wider economy.

3. Senior Manager Function applications

The PRA will be reviewing its approach towards Senior Manager applications, with a view to reducing the burdens involved during current events.

The BOE and PRA will also review their respective regulatory change programmes, postponing non-critical work to allow firms and FMIs to instead focus on key consumer protection and stability measures. 

Other key announcements

Immediate announcements in relation to the following areas were also detailed:

  • An update on the creation of the Financial Services Regulatory Initiatives Forum (‘RIF’): the RIF has been set-up to ‘help regulators identify and manage peaks in operational demands on firms resulting from regulatory initiatives and to ensure firms have an early and clearer understanding of them’.

The UK regulators have agreed that the first meeting will take place ‘as soon as possible’ during April 2020. A ‘Regulatory Initiatives Grid’ (‘RIG’) will be published following the first meeting to ensure that industry has ‘full sight of a coordinated future work plan as early as possible in light of COVID-19’. The RIG was initially due to be launched in summer 2020 and is set for bi-annual publication, as the UK looks to develop a clearer coordinated approach to UK financial services regulation.

  • Operational Resilience Policy Development delayed: the deadline for responses to the current BOE and PRA consultations on ‘Building Operational Resilience: Impact tolerances for important business services’ and ‘Outsourcing and third party risk management’ will be extended until 1 October 2020; and
  • Potential Basel 3.1 timetable delays: the PRA acknowledges that the existing timetable may be too challenging due to the impact of the novel coronavirus and is currently coordinating to ensure that implementation will happen in parallel to other major international jurisdictions. The PRA will advise the Government accordingly on its approach during the introduction of legislation implementing Basel 3.1 in the UK.

The full BOE-PRA statement is available here.

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