When the COVID-19 pandemic broke out in early 2020, FinCoNet members quickly understood that the public health crisis and related government measures would have an impact on the financial sector and thus the work of the market conduct supervisors who comprise its membership. Additionally, supervisory authorities themselves were subject to government measures to contain the virus, particularly lockdowns, meaning many supervision staff had to perform their jobs remotely. The extraordinary crisis brought on by COVID-19 challenged supervisory authorities to find new ways to do their work, in very short order.
In mid-2021, FinCoNet’s Standing Committee 4 (SC4) surveyed market conduct authorities around the world to understand how they addressed COVID-related challenges. It focused on the impact of remote work and the use of supervisory technology (SupTech) tools in the new environment shaped by COVID-19. This report summarises the results from 19 authorities that took part in the survey and provides several case studies illustrating how individual authorities adapted to the challenges brought on by the pandemic.
New challenges
Nearly three in four respondents reported that certain areas of conduct supervision had grown in importance during COVID-19. These areas included managing complaints, monitoring advertising, delivering consumer education, monitoring financial relief measures such as loan-repayment moratoria, and increasing regulatory reporting. To illustrate the increased digitalisation brought about by the pandemic, respondents noted the growing prominence of online advertising and other digital communication by regulated entities. At the same time, consumers accelerated their own adoption of financial products and information through the same digital channels.
Almost 85% of respondents implemented remote work (i.e., working from home) for supervisory staff during the pandemic, which required authorities to adapt policies, systems and procedures. Respondents noted that the adjustment to remote work affected all functions of market-conduct supervision. The areas required the greatest modification were on-site inspections, reporting and complaints handling, as well as coordinating with other regulatory authorities and meeting their requirements. More than one in four respondents said that due to the pandemic, their authorities had created new areas of market conduct supervision in the face of risks that had grown in importance. The most prominent area was the monitoring of government relief measures for consumers.
Main findings
- Authorities adjusted their supervisory approaches and regulatory frameworks to adapt to evolving challenges while preserving their supervisory activities. About two-thirds said the pandemic’s greatest impact was on their ability to conduct effective on-site inspections.
- They experienced challenges in the following areas: new/emerging aspects of marketconduct supervision; communication between the supervisory authority and regulated entities; and digital inclusion and protection of vulnerable consumers.
- Authorities had to introduce policies or enhance systems and procedures to support this pandemic adaptation.
- Authorities said remote work yielded the following advantages: the development of new supervisory approaches; a perceived increase in productivity through flexible communication; cost savings due to reduced business travel; and improvements in employee work-life balance. Authorities were split evenly (42%-42%) on whether their organisations would continue to perform supervisory functions remotely.
- Most responding authorities used SupTech tools during the pandemic; however, more than one-third did not. SupTech tools were used most commonly for data collection and data analysis. Only 16% reported that SupTech significantly improved supervisory processes; 53% reported modest improvements due to technology.
- SupTech tools enabled authorities to effectively carry out their duties in protecting consumers, emphasising their growing role in helping authorities fulfil their mandates.
- The use of such tools presented three main challenges: a. Certain tools were not designed for remote supervision; b. Staff faced difficulties adapting to meet new requirements and reporting deadlines; and c. It was challenging for supervisors to gain access to regulated entities’ internal systems to conduct remote inspections.
- In general, authorities have benefited from efficiency gains realized through SupTech, improving how they supervise market conduct and helping them to keep up with the financial sector’s digital transformation.
Looking ahead
The COVID-19 pandemic altered the way many authorities conduct supervisory activities. Regulated entities and their customers began to do much more business through online channels, and many authorities turned to SupTech to help them carry on and to render their own activities more efficient, particularly during lockdowns that required remote inspections and other at-home work by staff. During the crisis, many governments gave their authorities new functions and duties, including:
- overseeing and monitoring government measures, such as loan payment moratoria, to respond to the pandemic’s impact on financial consumers;
- mitigating the increased incidence of fraud in digital channels; and
- addressing the increased vulnerability of financial consumers.
These factors have triggered or accelerated the enhancement of SupTech tools in many jurisdictions. While the pandemic may have been the reason why so many authorities made the leap into remote supervision and regulatory digitalisation, both are likely to remain and possibly expand. Ongoing sharing and assessment of authorities’ experiences in relation to SupTech tools and remote supervision will support improvement in the technologies, processes and policies that can enhance authorities’ efforts, improve their efficiency and reliability and potentially expand their ability to conduct their work in protecting financial consumers.
