Regulation  

What the regulators must do now

Paul Grainger

Paul Grainger

COVID-19 (Coronavirus) has caused a global economic and social crisis in which financial services firms have a key role to play.

The FCA and other regulators must now step up and give proactive guidance on what financial services firms can and should do to provide services to clients and to protect those firms and their employees.

The government in the United Kingdom has issued guidance over the last month guiding people on how to best avoid infection with Covid-19 or to best deal with infection or contact with people who have contracted Covid-19 or who have suspected symptoms.

The guidance has become more prescriptive as the Covid-19 escalated from being an outbreak to a confirmed pandemic.

Alongside the escalating medical guidance, as the severity of the pandemic and the economic and social dislocation it would cause became clear, the government issued pledges of financial assistance on an unprecedented scale, to various groups in society, not least business and employees.

However, it is in this latter area of financial assistance that the financial services sector finds itself playing a key role.

Government support to business

The government’s pledge of support to business and to employees looks, at face value, to be straightforward.

Some aspects of the financial support are easier to understand than others.

A deferral of VAT or cancellation of business rates is relatively easy to understand and administer.

This is not necessarily so when looking at how government guidance and assistance will work in areas such as the Coronavirus Business Interruption Loan Scheme (CBILS) or in gaining access to support to continue to pay the wages of staff under the Furlough scheme.

Smaller and medium sized businesses in need of financial support, will also be likely to seek guidance from their financial adviser or insurance broker alongside their accountant and other business advisers.

It is important that financial advisers know how to access these schemes and how they will interact with loan repayment holidays, insurance policy claims or similar support arrangements.

The same issue applies to the employees of firms who are often also the clients of financial advisers and insurance brokers.

Many employees and self-employed or “Gig Economy” workers will have mortgage, rent, car loan and other financial commitments at the very time they fear losing their job/income.

It is only a matter of months since the PPI scandal was finally put to bed, yet there is a lack of government and regulatory guidance on whether and how income protection insurance products or loan protection products will pay out.

The FCA and the government have demonstrated they can be decisive and show leadership when there is a need and a mind to do so. The FCA has already issued directive guidance to capital markets participants and listed companies.