The change is not driven by a single factor, but by a combination of prudential rules, regulatory pressures and climate change goals which include:
- Evolving prudential regulation, particularly Basel 3.1, aimed at ensuring bank safety and soundness by strengthening capital requirements and improving risk management, is already focusing lenders on the capital cost of high-risk lending. Loans under the microscope include commercial facilities, high-LTV mortgages and those offered to less creditworthy applicants. The cost of holding “expensive” exposures is already influencing lending appetites
- The Consumer Duty requirement that “Boards must evidence that customers are receiving good outcomes – not just that frameworks exist” is already influencing product design, pricing and distribution. Lenders are recognising that they can no longer operate arbitrary price differences between similar products or customer groups without being able to evidence that any price differential is proportionate to the costs, risks and value provided.
- Central Bank climate change stress tests are also pushing lenders to understand their exposure, manage long-term financial risks from the transition to a net-zero economy and support “green” funding for qualifying assets
At Rockstead, we provide the independent assurance that investors, funders and regulators now expect. Our clients, from global banks to challenger lenders, rely on us to deliver:
- Loan book due diligence that evidences asset quality for securitisations and warehouse facilities
- Consumer Duty reviews that test outcomes, not just processes
- Ongoing portfolio monitoring that identifies arrears, fraud and conduct risks, before they hit performance metrics
- Fact-based reporting
We have conducted independent reviews and due diligence analyses on over £400bn of loans across the UK and Europe, establishing ourselves as the longest-running specialist provider of risk consultancy and management services in this market. We are trusted by major institutions and are certified suppliers to many global brands. Whether you are a lender, investor, funder, or Chief Risk Officer (CRO) in any regulated business, our technical experts can assist you in refining risk models, improving data quality and enhancing analytics.
We’ve been helping regulated firms grow safely since 2008, so give us a call to discuss these and other emerging risks.
