Financial Services Update – May 2020


Financial Services Update – May 2020

This page was last updated on May 18, 2020

In this quarter’s issue we examine the FCA’s response measures to Covid-19, the new Prudential Regime and Brexit preparations

18 May 2020


Coronavirus measures

The effects of Covid-19 have dominated the headlines around the globe for the last several months, and we sincerely hope this quarter's update finds you, and your firms, well.

It is a difficult time on many levels, with firms facing significant financial and operating pressures as a result of the lockdown measures. In response, the FCA has issued sector specific guidance for firms on its website in terms of how it handles certain situations (such as SM&CR managers being out of action due to Covid-19).  You can read it here

It has also granted extensions to a number of reporting requirements which are detailed here.  It is important to note the finalising of annual accounts is a key deadline, and this has been delayed until 30 June 2020 for accounts which would usually be due by the end of April .

Whether the FCA extend this further, post 30 June 2020, we will have to wait and see. Many firms have a 31 March year end, which creates reporting obligations for the end of July. At time of writing these stand, but they may be extended in due course.

It's also important to note that CASS Audit obligations have not been extended to date, and remain due four months after the year end.


New Prudential Regime

Changes to this have been in the works for some time now, but there is now some more clarity on implementation. The Capital Requirement Directive (CRD) and Capital Requirement Regulations (CRR) are being replaced, for some firms, by the Investment Firms Regulation (IFD) and Investments Firms Regulation (IFD).

The CRR and CRD rules are particularly onerous for smaller firms, as are designed principally for large credit institutions. The regulators have acknowledged this and brought in simplified rules in the IFR and the IFD. We published an article last year covering details of the changes and you can read it here.

The FCA was due to publish a consultation paper in late 2019 on how they intend to implement the new rules in detail, however at time of writing they have yet to do so. As we are leaving the EU, and the IFR and IFD are pieces of EU legislation, the FCA will need to determine how to apply these rules.

How to prepare

Firms looking to prepare now, can do so on the basis of the IFR and IFD rules directly, and then modify if necessary once the FCA has set out its intentions.

The IFR and IFD come into effect for EU member states on 26 June 2021. There are changes to the base requirements, but importantly credit risk and market risk have been replaced by brand new ‘K-Factor’ calculations. These are discussed in the article meantioned above.

The IFR contains a number of transitional arrangements to reduce the impact of the new regime. For a period of five years from the date the IFR enters into force, the following transitional arrangements are available:

Although not due to come into force until June 2021, firms should begin considering how the new regime will affect them, and keep an eye out for the FCA’s consultation paper outlining how it intends to apply the new rules in a post-Brexit scenario.



We are now in an implementation period due to last until 31 December 2020, in which the UK will negotiate its future with the EU. During this period, EU law continues to apply in the UK and passporting continues. Any new EU legislation passed in the period also applies to the UK.

In April 2020, the FCA stated its intention to use the Treasury’s Temporary Transitional Powers (TTP) from the end of the transition period. This enables the regulator to waive or modify (for a limited period) firms’ regulatory obligations that have changed as a result of the ‘onshoring’ of the post-Brexit financial services legislation. Essentially this means most regulatory obligations for firms will remain the same until March 2022.

More information is available on the FCA website here


Can we help?

If you would like to discuss any of these developments or have questions for our specialist Finance Services team, please do get in touch.


Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary, if you would like advice or further information, please speak to your usual Shipleys contact.

Copyright © Shipleys LLP 2020

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