Regulators, including the BoE, PRA and FCA, are renewing their attention on how firms manage and control the third parties that they work with. Most regulated firms are used to working within the SYSC rules to manage third parties, but the new focus considers additional oversight in respect of critical third parties.
One area of business where lenders have not had to apply a lot of attention to in recent years is property repossessions. However, repossessions are increasing again; a trend that is likely to be with us for several years. This is an area where many firms rely on the specialist services of third parties, including servicers, litigation solicitors, debt counsellors and asset managers.
Now is the time to review SLAs, which may not have been looked at for 15 years or so, to check that they remain fit for purpose. Having looked at some recently, our view is they need updating as the market has moved on since the global financial crisis. For example, new processes are needed to deal with last minute ‘breathing space’ (see our last blog) – such arrangements just didn’t exist the last time there were significant numbers of repossessions.
Many investors are comfortable investing in non-performing loan portfolios [‘NPLs]. The risks are known from the outset and there are proven workflows to manage those risks. A distinct set of management skills are needed when loans become non-performing. Lenders’ staff now need to learn different skills and to adopt new procedures. Think about how many lenders have come to market since the last recession and the thousands of staff who have not worked through one!
Rockstead, formed in 2008, has a track record of helping holders of mortgage portfolios to ensure there is effective governance and oversight of these types of SLAs. The checks we undertake can include, fees charged, customer response times, TCF and policies and procedure compliance. It not only satisfies regulatory requirements but makes good commercial sense to ensure that third parties comply with agreed service levels.
If you would like to find out how we can help you manage your third-party relationships and SLA’s, give us a call.