‘Intense’ consumer protection supervision drove the largest rise in regulatory pressure on financial services firms in 2024, according to KPMG UK’s Regulatory Barometer.

It found that the greatest increase in regulatory pressure stemmed from requirements to comply with and embed consumer protection regulations.

Increased scrutiny from the Financial Conduct Authority (FCA) on how firms evidence good customer outcomes, driven by the Consumer Duty reforms, had resulted in a “significant increase” in regulatory pressure.

The regulatory impact score in this area has risen from 6.8 to 7.4 out of 10 since March 2024.

Despite this being the largest increase, the most significant regulatory burden for financial services firms continued to stem from requirements to maintain and strengthen financial and operational resilience, both scoring 8.1 on the barometer.

Across both these areas, impactful policy initiatives are being finalised and implementation deadlines are approaching, corresponding to high levels of supervisory intensity, KPMG noted.

While ESG and sustainable finance remained high on the regulatory agenda, KPMG reported a slight fall in regulatory intensity, from 8.4 to 7.9, reflecting a slowing in publication of new policy after several years of activity.

“UK firms have really felt the weight of the Consumer Duty over the last six months as the reform has shifted from policy interpretation and implementation to high supervisory intensity,” stated KPMG Regulatory Insight Centre head, Philip Deeks.

“The uptick in regulatory pressure partly reflects the mammoth task firms faced as they raced towards the July deadline of compiling the first annual Consumer Duty board report and meeting obligations of their closed books.

“However, it is the pace and intensity with which the FCA has challenged firms for evidence of the outcomes they are generating that have driven most of the increase. The FCA has developed a keen appetite for data from firms.

"It has also moved quickly and been proactive in sharing its initial findings on how firms have implemented the duty. Consequently, firms are feeling the pressure in responding to supervisory demands while simultaneously re-calibrating and enhancing their approach to the duty.

“Now that the duty has been fully implemented, some firms may be breathing a momentary sigh of relief. However, we do not expect intense supervisory pressure around consumer protection to ease off as the duty and regulatory expectations around it evolve.”

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