4 Key Changes Impacting Regulatory Compliance in 2024

It should come as no surprise that 2024 is set to be another year of significant regulatory changes for the financial services industry. It was reported that an eye-watering 800+ regulatory updates were issued over the last year alone. 

The same report revealed that 62% of compliance leaders expect increased resources allocated to risk and compliance topics in the following 12 months. 

So, what can we expect from 2024? It looks like a mixed bag of regulatory changes, with more than 60% connected to digital finance, data & AI, sustainability, and crisis management.

Given the scale and scope, we have focused on four regulatory shifts that will likely have the most significant impact on the financial services sector over the coming year. Let’s dive in…

1. Access to Cash

What: The Financial Services and Markets Act 2023 introduced a requirement for banks and building societies to ensure reasonable provision of cash deposits and withdrawal services for personal and business current accounts in the UK.

Impact: Financial institutions will need to assess the adequacy of cash provision in significant changes in local access, including the closure of a bank branch or a cash machine.

When: Following FCA consultation, it’s expected the rules will be implemented in the summer of 2024.

2. FCA Consumer Duty

What: In July 2023, The Financial Conduct Authority introduced its key policy to ensure that customers’ interests become central to organisation’s culture and purpose and that it is embedded through the organisation, in their strategy, governance, leadership and people policies.  It is a major initiative. Firms are now being asked to ensure that this is not a once-and-done exercise, but continue to learn and improve, and evidence in their abbula reporting.  There is an additional deadline for firms with closed products and services of 31 July 2024.

Impact: The Consumer Duty remains a top priority for the FCA, and they will now test firm’s implementation and embedding activities.

When: Immediate impact for firms around being tested on implementation and embedding, and summer deadline for implementation of Consumer Duty obligations for closed products and services.

3. 2024 EU AI Act

What: The 2024 AI Act is a landmark legislation that outlines the EU's approach to artificial intelligence (AI).

The regulation establishes a risk-based framework for developing and deploying AI applications and will assign one of three risk categories: unacceptable, high, and limited. The Act also introduces requirements for foundation models, general-purpose AI, and generative AI models and systems. AI is an area that is growing rapidly, and will have far-reaching consequences for many firms and customers, but does pose risks.  

Impact: The Act impacts financial service firms with operations in the EU and governs the development, deployment, and oversight of AI technologies. 

When: Spring 2024. 

4. European Banking Authority (EBA) Final Guidelines on ESG Risk Management

What:  In 2024, the EBA is poised to release conclusive Guidelines on ESG risk management, aligning with its sustainable finance roadmap.  As part of this initiative, the EBA will undergo revisions to its SREP Guidelines, encompassing an inclusive assessment of climate risks.  Institutions should embed ESG risks in their regular processes including risk appetite, internal controls and ICAAP.  Besides, institutions should monitor ESG risks through effective internal reporting frameworks and a range of backward and forward-looking ESG risks metrics and indicators.

Impact: A final report will be published, offering insights into the justification for dedicated prudential treatment of assets linked significantly to activities associated with ESG objectives under CRR2.

When: There is a consultation process running through to April 2024, with guidance expected to be issued later in the year.

Fail to prepare...

Financial institutions must stay up-to-date with the latest changes to remain compliant and protect themselves. Not only that but leveraged in the right way, new regulations and amendments can actually help organisations expand into new markets and evolve.

For more information on 2024 regulations and how to prepare your organisation for change, download our free eBook "Navigating Regulatory Waters in 2024: A Practical Guide to Good Governance" today.