The FSCA this week provided an update on developments with the cross-sectoral Conduct of Business Return (Omni-CBR) planned for financial institutions. The FSCA’s communication indicates the Authority has taken note of the industry’s extensive concerns with the draft Omni-CBR template, which will result in numerous changes being made to it.
This and the FSCA’s willingness to engage in further consultation with the industry have resulted in a further welcome development: the timelines for the implementation of the Omni-CBR have been pushed out.
That said, Moonstone’s main concern with the first version of the Omni-CBR is that it is a return about business conducted, rather than a return about how FSPs conducted themselves when doing business. This is because few of the questions are designed to establish how the FSP behaved towards the client while rendering a service. The FSCA will collect a mass of data from multiple sources every quarter, but it is unclear how this data will enable the Authority to establish whether FSPs are meeting their compliance obligations.
Moonstone’s other concerns with the Omni-CBR are:
- FSPs, particularly smaller FSPs, do not have the systems to provide the information required. They will have to develop or purchase systems to assist, and currently no retail software or system options are available that are fit for this purpose. The development of software is prohibitively expensive for small businesses.
- The requirement to report on various income streams in minute detail is unreasonable, and no accounting systems available in the retail space provide for this level of reporting at present. The concern implications are a concern.
- The FSCA will obtain the same information from various sources, with the result that the information will be inaccurate.
- The amount of information required violates the principle of minimality in the Protection of Personal Information Act.
What emerged during the consultation process
The FSCA said the feedback from stakeholders highlighted important factors that require further consideration and broader consultation to ensure a more streamlined, efficient, and effective conduct reporting framework in the longer term.
“Such a framework must balance the need for consistent access to meaningful data that facilitates and monitors the delivery of fair outcomes to financial customers without imposing disproportionately burdensome or overly complex compliance obligations on financial institutions.
“The above will require clearer ongoing guidance to, and deeper collaboration with, market participants to refine the Omni-CBR framework so that future conduct reporting is implemented in a pragmatic and proportional manner that enhances transparency and confidence in the financial sector for the benefit of both financial customers and financial institutions alike,” the Authority said.
The FSCA’s communication summarises the key themes that emerged during the consultation process, and further details on each theme are provided in an annexure.
Next steps and revised timelines
The “voluminous and critical” feedback will see the draft Omni-CBR template undergoing a number of changes, including a significant streamlining of the requested data points, the FSCA said.
The Authority said it is having ongoing engagements with the Prudential Authority to align regulatory reporting requirements and mitigate the potential duplication of reporting.
The FSCA is finalising a consultation survey to obtain deeper insights into the potential operational and systems impact of future Omni-CBR reporting. The survey is envisaged to run, to the extent reasonably possible, in parallel with the industry pilot of the revised reporting template.
The implementation timelines will be extended. A breakdown of the extended timelines for Phase 3 (“Two-year transitional reporting”) and Phase 4 (“Steady state post-COFI final implementation”) of the roll-out and implementation roadmap will be communicated during 2024. The revised roadmap communicated by the FSCA in June 2022 envisaged that Phase 3 would be implemented in 2024 and the final phase in 2026.
During the first half of 2024, work will continue with the Phase 1 (“Consultation on terminology and data requirements”) and Phase 2 (“Assessment of systems and operational impact”) activities in the roadmap. The FSCA is targeting the following timeframes:
- Until 1 April 2024: continuing with follow-up industry engagements to clarify outstanding issues raised in respect of the current version of the draft Omni-CBR template.
- By 1 July 2024: publishing a revised, streamlined version of the draft Omni-CBR template.
- By 1 July 2024: publishing an industry survey on the potential operational and systems impact of implementing the revised Omni-CBR requirements.
The above timelines may be revised during 2024 in light of further refinement and harmonisation efforts that may be required following the pending enactment of the Conduct of Financial Institutions Bill.
The planned industry pilot will be launched in the second half of 2024 after, and based on, the outcome of the consultation survey.
Further updates on progress relating to the activities described above will be provided by 1 July 2024.
Moonstone urges FSPs to avail themselves of the opportunities to engage with the FSCA, which include responding to the consultation survey and participating in the pilot of the revised reporting template. Participation is the only way FSPs can influence the final version of the Omni-CBR.
