UK monetary watchdog won’t situation WhatsApp guidelines to banks, says head | USAEMALL.com

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The UK’s financial watchdog has decided not to introduce rules to prevent City bankers from using WhatsApp and other encrypted apps for unauthorised business communications.

Nikhil Rathi, chief executive of the Financial Conduct Authority, said its decision not to impose a blanket approach was part of a shift away from detailed rulemaking.

“We’re not planning any wholesale new rules around this,” he told the Following the Rules podcast. “We don’t think firms should expect from us lots of detailed rules to try and pin down every possible scenario that they are planning for.”

The City should expect “a different relationship” with the regulator, he added.

The FCA has done two rounds of surveys at City companies to find out about their approach to the use of encrypted apps. But it is yet to take enforcement action over the issue or to announce any plans to regulate the area.

“It’s obviously a significant issue with the prevalence of different forms of communication,” Rathi told the podcast, in comments reported by Banking Risk & Regulation, an FT Specialist service. “We’re working with firms on a case-by-case basis to understand how they are monitoring these types of activities.”

The UK government has been pressing the FCA and other regulators to do more to support economic growth and competitiveness by easing the burden of bureaucracy on business.

The FCA’s approach contrasts with the US, where banks and other financial groups have been fined more than $2.5bn in total by regulators when their employees have used WhatsApp and other encrypted messaging apps to communicate. 

The popularity of such encrypted apps, particularly during pandemic lockdowns, has frustrated banks’ attempts to ensure that all electronic communications are stored properly, and has impeded several high-profile US investigations into wrongdoing.  

A group of 18 big banks and brokers — including Bank of America, Goldman Sachs, Barclays and Deutsche Bank — agreed in 2022 to pay a total of more than $1.8bn in fines to US regulators for failures in their record-keeping of encrypted staff messages.

In response to the UK government’s call for more pro-growth moves, the FCA listed nearly 30 measures that are planned, or are already under way, in a letter published last week. Rathi said it would “rigorously prioritise resources” to support this shift.

Some financiers have complained about the regulator’s shift away from prescriptive rulemaking to focus more on eventual outcomes, such as its consumer duty rules introduced in 2022. These require firms to ensure they give “fair value” and “good outcomes” to customers without specifying exactly how to achieve this.

There are also worries in the City about the regulator’s plan to issue fresh guidance about non-financial misconduct, such as bullying, sexual harassment and racism, later this year. 

However, Rathi sought to downplay its plans, saying: “What can be categorised as non-financial misconduct is quite broad.” He added: “I don’t think we could realistically give completely precise rules for everything. That would just be unrealistic.”