Around this time of year, the FCA usually issues two significant, interlinked, documents. This year is no different as their business plan and perimeter report were both announced at the end of October. As always, they are packed full of nuggets and both reference FCA directional thinking, so there is plenty for risk professionals to consider for the new year.
By paying close attention to the regulators messaging, we constantly collaborate with clients on different themes and are happy to report that many of them are no longer content with being on the back foot or behind the regulatory curve. Here are three themes that are exercising minds: –
• Unregulated purchasers of mortgage books. While the plight of ‘mortgage prisoners’ has rightly been exposed by media outlets, the FCA acknowledges that unregulated purchasers generally delegate key interest rate and forbearance decision-making to regulated firms. We help book purchasers by reviewing working practices of the relevant parties to report on their compliance with SLA’s and TCF principles. Additionally, with the FCA due to deliver a full report to the Treasury imminently, 2022 will clearly present new challenges for unregulated purchasers.
• Deferred payment credit (sometimes known as ‘buy-now pay-later’ products). While the Treasury argues that a degree of proportionality needs to be applied, because of the limited size of any likely harm, the customer profile of consumers entering arrangements often show signs of vulnerability and, therefore, they need extra protection. We are helping firms understand customer vulnerability and assisting with oversight of their procedures.
• Senior Managers and Certification Regime. Many commentators, including us, believe that some business models on the FCA SM&CR ‘extension list’ should have been included years ago. The FCA now seem to confirm that view by stating that extending SM&CR to, for example, credit ratings agencies will “deliver greater accountability and robust oversight of functions that promote market integrity”. Businesses on the potential inclusion list are already seeking our support.
While the FCA position on these matters may evolve throughout 2022, firms are working hard on their preparation work. If you are interested to hear how we can help, give us a call.