Governance and conduct video series: 5 key conduct focus areas for 2019

Video | February 2019 | 4:14

Video Details

Governance and conduct video series: 5 key conduct focus areas for 2019
Christian Blackwell
Hello and welcome to the next in our series of videos on governance and conduct.  I’m here today with Alina Rotari to talk about the top five areas for 2019 in terms of conduct risk.  Alina, what are we seeing this year?                                                                  
Alina Rotari
Thank you Christian.  I will start off the with the fact that the FCA is putting a growing emphasis on responsible lending practices with access to credit and affordability management and embedding that affordability into project design being significant challenges that retail banks are focussing on at the moment.  Also, when it comes to managing recovery situations and also making firms more aware that they should focus on retaining payment rather than the potential manageable debt.  As we know, the FCA is already releasing an interim report in the mortgage market study, it will launch a new market study in credit information but it will also look at some of the provisions in the Consumer Credit Act.  With this in mind, firms should start looking at how these changes will translate into their firm’s overall conduct when it comes to responsible lending
Christian Blackwell I am also hearing a lot about vulnerable customers.  What are the FCA saying about that this year?
Alina Rotari Vulnerable customers is another topic quite high on the conduct agenda. Because we have seen a lot of intelligence produced by the FCA or the BBA in forms of consultation papers and guidelines and market studies. We know that there are still some legacy issues. So first thing, there is still a lack of interpretation of what actually vulnerability means. Given that the definition is too narrow, there is a lack of consideration of this segment when it comes to product distribution and advisory strategies. But there is also poor lending practices, especially given the fact that there is a weakness in calculating affordability. We also know that the FCA will be releasing new guidance in 2019 focussing more on vulnerable customers and also helping firms to identify and categorise this segment as part of their suitability assessments. As a parallel, I just want to make a quick point on vulnerable customers but more from a data perspective. We know, although it is not new, GDPR and PSD2 will give the regulator more reason and more tools to take a strategic look at how firms actually use consumer data. Especially when it comes to fair outcomes and pricing of vulnerable consumers.
Christian Blackwell What about product governance? What do we see in that area?
Alina Rotari Another key area for 2019 is product governance. Given that there has been so much emphasis on innovation and technology, the shift will focus towards how this innovation and technology will influence the client’s understanding of the products offered. But also, how will the firm conduct itself when things go wrong? Say when the product purpose is lost during design phase or new products are being pushed without considering the initial portfolio. This leads into my fourth point and given there has been this overload in innovation and technology, I think it makes it harder for firms to quantify and manage the third party provider’s risk but also the supply management. We already know that the FCA is planning to do some thematic reviews in this area so I think it’s important for firms to actually have a thorough look at what type of products and services they are providing and outsourcing but also what are the arrangements with the third party providers and follow up on any conduct errors.
Christian Blackwell Another area which comes up again and again is whistleblowing. Is there anything particular we should be looking at this year?
Alina Rotari We know already that the FCA has released its whistleblowing findings on the retail and wholesale banking together with expectations for senior managers and the board. But also with good areas for practice and areas for improvement so I think in 2019 firms should focus on this and look at their own whistleblowing conduct infrastructure and see how they could align these changes in a way would satisfy the regulators expectations and requirements.