Coronavirus (COVID-19): UK FCA Helps Firms Identify Key Financial Services Employees

While offering guidance on which financial services workers could be considered essential, the UK Financial Conduct Authority says that firms themselves are best placed to make those decisions.

The United Kingdom’s Financial Conduct Authority (FCA) on 20 March 2020, published steps that regulated firms should take to help identify key workers in financial services. The FCA begins its advice by setting the issue squarely within the wider framework of the UK government’s advice published the day before on maintaining educational provision.

The UK government has closed schools for the most part but is asking schools to continue to provide care not only for vulnerable children but also for a limited number of children whose parents are critical to the coronavirus (COVID-19) response, which includes parents working in the financial services sector whose children cannot be safely cared for at home. The FCA points out that this category includes parents who work in financial services and are needed for the provision of essential financial services which it labels as “key financial workers”.

The FCA explains that a “key financial worker” at a dual-regulated firm (for example, a bank, investment bank, or insurer regulated by the FCA and Prudential Regulation Authority), the FCA solo-regulated firm, or payment services regulated firm, or at an operator of financial market infrastructure, fulfils a necessary role for the firm/operator to continue to provide essential daily financial services to consumers, or to ensure the continued functioning of markets.

Here are the FCAs’ rules of thumb:

• To help firms identify who they are, firms should first identify the activities, services, or operations which, if interrupted, are likely to lead to the disruption of essential services to the real economy or financial stability.
• Firms should then identify the individuals that are essential to support these functions.
• Firms should also identify any critical outsource partners who are essential to continued provision of services, even where these are not financial services firms.
• For firms that have a so-called SMF1 Chief Executive Officer, that person is accountable for ensuring an adequate process so that only roles meeting the definition of “key financial workers” (elaborated below) are designated.
• For firms that do not have an SMF1 Chief Executive Officer, this will be the most relevant member of the senior management team.

By way of example, the FCA enumerates the types of roles that may be considered as providing essential services as follows:

• Individuals essential in the overall management of the firm (for example individuals captured by the Senior Managers Regime);
• Individuals essential in the running of online services and processing;
• Individuals essential in the running of branches and providing essential customer services, such as those dealing with consumer queries (including via call centers), client money, and client assets, and those maintaining access to cash and other payment services;
• Individuals essential to the functioning of payments processing and of cash distribution services;
• Individuals essential in facilitating corporate and retail lending and administrating the repayment of debt;
• Individuals essential in the processing of claims and renewal of insurance;
• Individuals essential in the operation of trading venues and other critical elements of market infrastructure;
• Risk management, compliance, audit, and other functions necessary to ensure the firm meets its customers’ needs and its obligations under the regulatory system; and
• Any individual that provides essential support to allow the functioning of the above roles, such as finance and IT staff.

The FCA expects only a limited number of people to be identified as being “key financial workers.”

The FCA asks firms to consider whether they should issue a letter to all individuals they identify as key workers that clearly identifies them as such and that can be presented to schools on request, recommending that the letter includes the sentence "the individual has been designated as a key worker in relation to their employment by [firm name]” and is signed by someone with appropriate authority. Firms should continue to follow UK government guidance on COVID-19 closely and take the recommended steps.

Read our earlier alert on the FCA’s second statement on COVID-19 issued on 17 March and our post about its first statement on 4 March.

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