Gowling WLG organised a roundtable with in-house lawyers and compliance teams across the financial services industry, both in traditional banks and fintech, to discuss how their companies have been affected by Covid-19 so far, and how they plan to move forward.

The discussion was led by Ian Mason, partner and head of UK financial services regulation at Gowling WLG, and Sushil Kuner, a principal associate in Gowling WLG’s UK financial services regulatory team. They focused the conversation on banks’ on-going relationships with the FCA, their home working policies and the mental health of their employees.

FCA guidance

Sushil Kuner opened up the discussion by observing that the FCA has appeared to be quick to act in its response to Covid-19, issuing a lot of guidance to firms and implementing policy change during the last few months. Most of this regulation has been focused on protecting consumers, through, for example, requiring firms to afford payment holidays to those customers adversely impacted by Covid-19 and supporting SMEs by seeking clarity from the Court on the interpretation of certain business interruption insurance policies. While the regulator recognised there would be practical and operational difficulties for firms, there was a general recognition that the Covid-19 “honeymoon period” may now be ending and an expectation that the FCA will begin to focus more closely on firms’ internal practices.

Ian Mason

The volume of guidance from the FCA has been an issue for some of the lawyers because it has not always been clear how best to implement it. One of the panellists said that the FCA has not been very communicative and they had called the FCA multiple times but had only heard back from them sparingly.

“We can’t fault the FCA’s issuance of guidance, but sometimes it is difficult to apply it all,” said one lawyer. This was a sentiment that was widely agreed with.

In order to manage the amount of information coming out of the FCA, one of the lawyers set up a dedicated team to process it. The team then sent out instructions to the relevant parts of the business on how best to apply the guidance. Alongside this dedicated team, the bank has also been able to have monthly calls with the regulator, because they were coincidentally in the process of an internal merger, and found that these calls were a great opportunity to better understand the FCA’s ongoing regulatory changes.

Presently the FCA is focusing on the crisis at hand and some of the lawyers had observed that the FCA is raising more queries with firms about their handling of Covid-19 with a greater focus on customer outcomes. Ian Mason believes the FCA will be increasingly vigilant for market abuse and other financial crime, given extensions to reporting deadlines and heightened risks from homeworking, and will come down hard on any offenders in order to make an example of them.

Working from home and returning to the office

Ensuring regulatory compliance is something that everyone has been trying to deal with from home. All the panellists transitioned to home working a few months ago and across the board found the process to be almost seamless. Most even noted that there had been an increase in productivity as employees were able to work on their own schedules and benefit from healthier lifestyles, including better food and more exercise.

For a lot of their management teams, who were quite often traditionalists that valued presenteeism, this has been an eye-opening experience which will likely lead to permanent changes to their flexible working policies. All lawyers agreed that there are clear productivity and mental health benefits from having a more flexible work force.

However, in order to productively work from home, initial investments have had to be made. A few banks have sent their employees monitors and work chairs. This not only helps make them more comfortable, as they aren’t sitting on less suitable chairs all day, it also psychologically creates a clear workspace at home.

Despite the success of homeworking, most of the attendees are expecting their companies to partially reopen their  offices. The common number banded around was a 30 per cent return rate. A significant minority of their colleagues, that live alone and near enough to the office to walk or bike, will be returning in the coming months. However, for departments that can work effectively from home, the return date will be a little further down the line.

Mental health of employees

While working from home for some has been successful, the lawyers all acknowledged that there were mental health issues that could arise from it. Management teams have been very conscious of this issue and it has been at the top of the FCA’s agenda. In the case of one lawyer, the FCA had been directly encouraging them to conduct staff surveys to better gauge how to help.

Everyone found that weekly catch up calls with their staff to discuss life, rather than work issues, has been beneficial. They also organised digital drinks to keep morale up and found that they were having more personal interaction with their colleagues than they would usually do in the office.

Advice that was shared to the group was to “support your staff on a case-by-case basis”. The pandemic has created difficult personal situations, with the specific example given being around employees renting near offices. One of the lawyers had decided to move back with family temporarily to avoid isolation of living alone in a small London flat and stop paying rent but had received the support of their employer who assured them that they would not have to make an immediate return to the office until the living situation had been sorted. This sort of personal support was greatly appreciated.

Kuner also raised the topic of training, and whether they had been able to continue to provide staff with training opportunities from home. In general, most of their training had been conducted online, so the lawyers felt there were no interruptions. Also, because working from home gave people more time, the training could be completed more easily.

Looking to the future

It’s clear that this pandemic has resulted in rapid changes to both operational practices within firms and how firms manage their employees. Firms appear to have responded well to the challenges and risks created by Covid-19 but how well they have met regulatory expectations is yet to be determined with expectations that the regulator will soon be highlighting good and poor practices in how firms have dealt with the pandemic.

Sushil Kuner

Sushil Kuner also observed that Covid-19 has put a renewed spotlight on environmental, societal and governance (ESG) issues. The pandemic and systemic health risk has sparked more concerns about other systemic risks, such as climate change, and there appears to be a greater focus on social factors such as how firms have been treating their employees, suppliers and customers who may be struggling as a result of the pandemic. There is an increased awareness and demand for ESG friendly financial products and services and firms who wish to remain competitive should really be considering ESG in the context of their businesses.

Mason concluded that the general view seemed to be that, despite the huge challenges posed by Covid-19, firms had responded better than could have been anticipated during the initial “fire-fighting” phase. However, they were now moving towards post Covid-19 planning, which had its own, different challenges.