Chris Hemsley, the PSR's Managing Director, reflects on the changes ushered in as a result of the Financial Services and Markets Act 2023.
On 29 June, the Financial Services and Markets Bill received Royal Assent, officially becoming law through what is now known as the Financial Services and Markets Act 2023.
It’s a big piece of legislation covering many aspects of financial regulation with various requirements for all financial regulators. There are provisions and sections relevant only to the PSR, or to the FCA, or the Bank of England and there are some that are applicable to all.
But from the legal detail comes the reality of changes to the financial regulatory framework that will impact everyone.
The Act is a landmark piece of legislation for financial regulation in the UK and includes a number of provisions that address issues raised by the PSR. It will help regulators ensure they have the tools they need to effectively regulate in a complex, ever changing sector. From a PSR perspective, the legislation moves the dial on payments regulation – there’s a lot in the Act that will increase flexibility and better reflect the future of payments. It also provides a mechanism to simplify the regulatory requirements.
Behind the scenes, we’ve been preparing for these changes, including by developing our approach so that we can comply with the new requirements and make use of the new powers as quickly as possible.
So, what do these changes look like in practice?
Let’s start with authorised push payment (APP) scams. The new Act has removed previous regulatory barriers that have, until now, prevented us from tackling this problem head-on, including by making reimbursement for victims of APP scams mandatory. You’ll know that we have already issued our policy position on how to prevent more of these scams. We’ve also consulted on the legal instruments that will place new requirements on payment firms.
This is a huge leap forward in terms of tackling fraud. Firms will now have the incentives to actively prevent fraud from happening and will have to be transparent about how well they are treating their customers. Victims will all benefit from consistent minimum levels of protection. Payment firms must start preparing for the date these new requirements come into effect in 2024.
Another area of focus in the act is around protecting access to cash. The PSR took a leading role in protecting access to cash, especially through our regulation of the UK’s ATM network. However, our powers only allowed action through the LINK network and through protecting the ability to withdraw cash from ATMs. Now, under the Act, the FCA is the lead authority on protecting access to cash; considering all aspects of cash access, including both deposits and withdrawals, and has the flexibility to consider solutions that go beyond just ATMs. This is a welcome step, that we have actively supported. The PSR will continue to regulate LINK, increasingly focusing on whether it fulfils its obligations as a payment system operator.
The Act also contains a number of provisions that relate to the government’s plan to develop a regime to regulate stablecoins and the cryptoasset sector. It clarifies the PSR’s role in in the regulation of Digital Settlement Assets (e.g. stablecoins or other crypto-assets that are used for payments) – making it absolutely clear that a payment system handling stablecoins can be subject to regulation by the PSR. Future-proofing the arrangements. The FCA will also have a role in the regulation of stablecoin – with today’s roles of the PSR and FCA being broadly replicated in the new framework.
More broadly, the Act will enable us and the other regulators to simplify our regulatory remit, by repealing retained EU law and incorporating important aspects of it into our existing domestic framework. This will help businesses to be clear about what rules they need to follow and give regulators a greater ability to make changes in an agile way. Simplification of regulations is also a good thing in itself, of course. And, sticking with the regulatory focus, the Act will see the PSR, and other financial regulators have greater oversight and accountability from Government.
Together, these new provisions in the Financial Services and Markets Act form an enhanced regulatory framework that all financial regulators will work within, with real-life impacts. The Act will strengthen our regulatory scope and ability to improve payment services for consumers and businesses, promote competition and encourage innovation.