COVID-19 – TTPs: a further potential decrease in regulatory oversight?
The UK Government recently announced an unprecedented albeit temporary change to the regulatory regime by extending Temporary Transitional Powers (TTPs) even further with an additional 2 years, in light of the COVID-19 pandemic.
TTPs provide financial service regulators with flexibility in exercising their regulatory oversight. The powers were initially intended to assist financial services firms in transitioning to the post-EU regulatory landscape. Indeed, in a recent blog we studied how financial service regulators, including the FCA, have decreased their regulatory oversight. Is there a risk that some financial services firms could take advantage of this potential further decrease in regulatory oversight?
TTPs provide financial service regulators (the FCA, PRA and Bank of England) with flexibility in exercising their regulatory oversight. In particular, the powers permit the regulators to suspend or revise their requirements in certain areas. This is so that financial services firms do not need to prepare now for what is currently an unclear regulatory landscape post-EU withdrawal.
TTPs were originally due to expire in June 2020. Following the delays in negotiating the UK’s withdrawal from the EU they were extended until the end of 2020. On 25 March 2020, TTPs were further extended by another period of almost two years, until the end of March 2022.
Interestingly, this lengthy extension has not been matched by a corresponding change in the UK Government’s position in relation to extending the period of negotiations with Brussels. As recent as 16 April 2020, the Government repeated its claim that under no circumstances will it seek an extension to the Brexit transition period beyond December 2020. This, despite the impact that COVID-19 had and will likely continue to have over the ability to conduct negotiations with Brussels.
One would expect that such a significant extension to TTPs would be met by a corresponding indication from the UK Government about a likely extension to the Brexit transition period. Political motives may be behind the absence of such an indication.
In circumstances where such an extension is not sought, the TTPs will apply significantly beyond the transition period. This gives rise to the risk that the regulators could make use of TTPs in circumstances where it may no longer be with the purpose of assisting firms with their post-EU transition.
As noted in our previous Perspectives, given the continued significant economic upheaval arising out of COVID-19, it is essential for businesses and consumers alike for strong regulatory oversight to be exerted over financial services firms in the months and years to come.