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#Governance, Risk and Compliance

Preparations for the UK Financial Conduct Authority are gathering pace

International Compliance Association

BBA , British Bankers' Association , FCA , Financial Conduct Authority

With recent speeches to the British Bankers' Association by both Martin Wheatley and Clive Adamson, and the resignation of Margaret Cole, we are beginning to get a clearer picture of the approach and focus of that the Financial Conduct Authority will have when it assumes its powers in a year's time.

Martin Wheatley’s tone when addressing the BBA was quite a forthright one; he does not appear to be a man to pull his punches. He re-iterated the product intervention approach that has already been discussed, and on more than one occasion reminded his audience that obtaining a fair deal for consumers was his priority.  For example he specifically stated that he wanted to see the development of “a culture in your firms, from your product governance to your sales, aligned with the best interests of your customers”.  The more invasive approach to supervision will involve the FCA talking directly to front line staff and using mystery shopping in addition to in-depth reviews.  And he made it clear that they would be seeking powers to be able to make temporary product intervention rules, as soon as they suspect that there is an issue, and to inform the public at a much earlier stage when investigations are being carried out.

In return he promised that the FCA will be better as asking the right questions and then make better, bolder and faster decisions.  He also promised much more openness and better engagement and clarity with firms.

Clive Adamson reiterated the more intensive approach to Supervision and Outcomes Focused supervision (specifically consumer outcomes).

To do this the FCA will focus upon five main elements:

  • To be more forward-looking in our assessment of potential problems
  • To intervene earlier when we see problems
  • To attack the underlying causes of problems
  • To secure redress for consumers if failures do occur 
  • To take meaningful action against firms that fail to meet FCA standards through levels of fines that have a deterrent effect

To achieve this the FCA intend to move away from a philosophy in retail conduct that relied primarily on transparency at the point of sale and, in the wholesale markets going beyond relying on the caveat emptor principle in ensuring integrity of these markets.

Finally he confirmed that whilst a risk-based assessed framework will be used, this will no longer be ARROW, and that there will be a move towards more thematic reviews in specific areas of concern, rather than full firm based reviews.

Margaret Cole’s resignation was perhaps not unexpected as it is believed that she was passed over for the Chief Exec role in favour of Mr. Wheatley, but her departure will be considered a loss to the regulator as her past performance as managing director of the Enforcement Unit has been widely considered a success.

With less than 12 months now to go to the new regulatory structure, and only two until the next major internal restructuring of the FSA in preparation, it is important to closely monitor what the key individuals are saying if we are to be fully prepared for the new regime.


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