Global menu

Our global pages

Close

Retail Finance round-up - 11 December 2015

Retail Finance round-up - 11 December 2015
  • United Kingdom
  • Financial services - Retail finance

11-12-2015

Personal accountability is the theme for this week with the FCA publishing Policy Statement 15/29: Strengthening Accountability in Banking and Tracey McDermott giving a speech to the City and Financial conference, in which she focused on the role of personal accountability in the financial services industry.

In the Policy Statement, the FCA sets out its amendments to the Decision Procedure and Penalties Manual (DEPP) and the Enforcement Guide (EG), to give guidance on how it will enforce the new accountability regime (including the Senior Managers Regime and the Certification Regime), and use the new powers created by the Financial Services (Banking Reform) Act 2013 (the Banking Reform Act). The paper explains that the FCA will enforce the Conduct Rules proportionately. When considering whether to take enforcement action against an individual, it will take account of their position and responsibilities. When enforcing the Conduct Rules, the FCA will follow a deterrence-based strategy: it will take effective and robust enforcement action across a wide range of firms and individuals.

Also of interest this week, the Financial Ombudsman Service has published a consultation paper on proposed changes to its voluntary jurisdiction.

Regulatory updates

Industry news

You may have missed…

FCA publishes Quarterly Consultation Paper

The FCA has published a Quarterly Consultation Paper.  Among other things, the paper contains a range of proposals to amend CONC and to change reporting requirements in relation to financial crime set out in SUP.

In relation to CONC the FCA proposes:

  • To amend CONC 2.7 and 11.1 to account for the Consumer Protection (Distance Selling) Regulations 2000 being replaced by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 from June 2014
  • To disapply the requirement to provide a representative example where triggered in the case of promotions where the product is free of interest or charges and the APR is therefore 0%
  • To disapply the requirement to provide a representative APR where there is a non-cost of credit trigger (for example, an incentive or comparator) but where the promotion relates to a product that is 0% APR as there are no charges and interest
  • To disapply the requirement for Community Finance Organisations to provide a representative APR in isolation on the grounds that such organisations serve a social function
  • To extend some requirements relating to credit brokers to P2P platforms (for example, fee disclosure) acting in that capacity
  • To remove the requirement that credit or store card providers give at least 30 days’ notice of an interest rate increase on the grounds that such a requirement is incompatible with the Consumer Credit Directive
  • To amend CONC to make clear that effecting introductions to sources of credit includes effecting introductions to other credit brokers for that purpose
  • To add the Association of International Accountants to the list of professional bodies whose members are permitted to give a statement of a consumer’s income and assets for the purposes of this exemption
  • To amend CONC 14.1.2R to make clear that a self-employed agent is likely to be regarded as conducting business on their own account if they are acting for more than one principal, whether the principal is authorised or not

The FCA is also proposing to introduce a financial crime reporting form.  The proposed form asks firms to provide information about the location of its customers, its financial crime procedures and also asks for various statistics in relation to financial crime.

In the main, the consultation is open until 4 February 2016, though proposals relating to Training and Competence and the Listing Rules close on 4 January 2016.

FCA publishes Policy Development Update – Issue 28

The FCA has recently published Issue 28 of the Policy Development Update for December 2015. As well as providing information on previous publications issued since the last edition, recent developments relating to the Handbook and other publications, the FCA has published an updated timetable for forthcoming publications.

The update includes an updated timetable for future publications and links to:

  • Consultation Paper 15/40: Financial Services Compensation Scheme: changes to the Compensation sourcebook
  • Consultation Paper 15/39: Rules and guidance on payment protection insurance complaints
  • Consultation Paper 15/37: Consequential amendments to the Senior Insurance Managers Regime (SIMR)
  • Consultation Paper 15/36: Future regulatory treatment of CCA regulated first charge mortgages
  • Discussion Paper 15/7: Our approach to SMEs as users of financial services
  • Discussion Paper 15/6: Possible FCA Handbook changes to reflect the introduction of the Innovative Finance ISA and the regulated activity of advising on peer-to-peer agreements
  • Guidance Consultation 15/6: Proposed guidance for firms outsourcing to the ‘cloud’ and other third-party IT services

FCA publishes Handbook Notice No.28

The FCA has published Handbook Notice No.28 for December 2015. The Notice contains legislative changes that the FCA Board made on the 3 December 2015, feedback to consultations that will not have a separate policy statement and the FCA’s Board dates for 2016.

The Notice contains feedback on the following instruments:

  • Training and Competence sourcebook (Qualifications Amendments No 13) Instruments 2015 (FCA 2015/56)
  • Personal Pension Scheme Operators (Capital Requirements) (Amendment) Instrument 2015
  • Mortgage Credit Directive (Amendment No 2) Instrument 2015
  • Supervision Manual (Amendment No 21) Instrument 2015
  • Dispute Resolution: Complaints Sourcebook (Amendment No 5) Instrument 2015
  • European Long-Term Investment Funds Regulation Instrument 2015
  • General Provisions(Amendment) Instrument 2015

FCA publishes PS15/29: Strengthening Accountability in banking: Final amendments to the Decision Procedure and Penalties Manual and the Enforcement Guide

The FCA has published policy statement 15/29 on strengthening accountability in banking.  In the policy statement the FCA sets out its amendments to the Decision Procedure and Penalties Manual (DEPP) and the Enforcement Guide (EG), to give guidance on how it will enforce the new accountability regime (including the Senior Managers Regime and the Certification Regime), and use the new powers created by the Financial Services (Banking Reform) Act 2013 (the Banking Reform Act).

Under the new regime, the Conduct Rules will replace the existing Statements of Principle and Code of Practice for Approved Persons.  The Conduct Rules will apply to a much broader range of people, capturing the vast majority of staff in relevant firms.  The paper explains that the FCA will enforce the Conduct Rules proportionately.  When considering whether to take enforcement action against an individual, it will take account of their position and responsibilities.  When enforcing the Conduct Rules, the FCA will follow a deterrence-based strategy: it will take effective and robust enforcement action across a wide range of firms and individuals.

The guidance in DEPP and EG will apply from 7 March 2016.  Senior Managers will be subject to the criminal offence relating to a decision that causes a financial institution to fail for conduct that takes place on or after 7 March 2016.

Individuals subject to either the Senior Managers Regime or the Certification Regime will be subject to the Conduct Rules from 7 March 2016.  Firms will need to make sure that their staff are aware of and understand the Conduct Rules before they come into force.

FCA publishes PS15/27: Cash Savings Remedies: Feedback and Policy Statement to CP15/24 and next steps

The FCA has published its policy statement on cash savings remedies following feedback it received on its consultation and discussion paper CP15/24.

In January 2015 the FCA published its final findings of the cash savings market study.  It found that the cash savings market was not working well for many consumers and it proposed remedies in four areas to improve the market:

  • Disclosure remedies including a standardised summary box, switching box and improvement to timing of customer communications
  • Sunlight remedy by improving transparency of interest rates
  • Switching remedies focused on making switching easier
  • Convenience remedies with the aim of reducing barriers so customers can manage savings and accounts in one place

The policy statement responds to the feedback the FCA received on the above proposals, it highlights where the policy has been adjusted to take into account respondents’ views and also sets out its next steps.  The changes will come into effect on 1 December 2016.

Financial Policy Committee publishes latest Financial Stability Report

The Financial Policy Committee (FPC) has published its latest Financial Stability Report.  The report sets out the FPC’s assessment of the outlook for financial stability in the UK.  To do this, the FPC identifies the risks faced by the UK financial system and weighs them against the resilience of the system.

In the report, the PRA reveals it intends to review the underwriting standards of buy-to-let lenders.  The Bank of England governor Mark Carney said the review of underwriting standards was to ensure there was not a shift from ‘responsible to reckless.’

The report notes that competition has increased among the sector.  While the report stresses this greater competition is not leading to widespread deterioration in underwriting of UK banks – it says some smaller lenders have loosened their criteria, namely their maximum LTV thresholds.

FCA speech on personal accountability

In a speech given at the City and Financial conference, Tracey McDermott, Acting Chief Executive of the FCA, focused on the role of personal accountability in the financial services industry.

In March 2016 the FCA is to introduce a new regime, the Senior Managers Regime (SMR) which places greater emphasis on the accountability of members of organisations in Senior Management. The FCA believe that this will be instrumental in changing the industry’s approach and preventing a “regulate, deregulate, repeat” cycle in financial services, with personal responsibility embedded, distancing the industry from a culture of short-termism.

The priorities within the SMR are, firstly, a clear focus from firms on meeting the spirit of the new rules, rather than approaching the regime with a narrow focus on the letter of the law, and secondly, for firms to take ownership of the regime and embrace the opportunities it presents for their business.

The FCA’s ambition is, via the personal accountability element within the SMR, for the industry to service its clients in a way that is innovative, vibrant, competitive and clean. This sense of accountability, in the FCA’s opinion, will allow the financial services industry to rebuild and maintain the trust and confidence of society.

Bank of England Statistical Release: Money and Credit: October 2015

The Bank of England has published its October statistics for money and credit.  Some key points in the statistics are:

  • Total lending to individuals increased by £4.8 billion in October, compared to the average monthly increase of £4.1 billion over the previous six months
  • Lending secured on dwellings increased by £3.6 billion in October, compared to the average monthly increase of £2.8 billion over the previous six months
  • The number of loan approvals for house purchase, remortgaging and for other purposes had all increased compared to their respective averages over the previous six months
  • Consumer credit increased by £1.2 billion in October, in line with the average monthly increase over the previous six months.

UK Cards Association releases card expenditure statistics for September

The UK Cards Association has published its card expenditure statistics for September.  Its statistics show that:

  • The average value of contactless transactions increased to £7.35 (which followed the new £30 payment limit)
  • Contactless accounted for 8.9% of total card purchases
  • Spending increased from £48.5 billion last year to £52.7 billion

Richard Koch, Head of Policy and The UK Cards Association, said:

“We expect to see last year’s trend of consumers using their debit cards, more than their credit cards, continue as we approach the festive season.”

Mortgage products and purchase applications continue to grow

The Mortgage Advice Bureau (MAB) reports that the number of mortgage products has grown to 16,620 in October. The biggest driver for this growth has been an increase in the range provided by the intermediary market.

Subsequently, total mortgage applications made through brokers rose 28.7% year-on-year in October, resulting in the largest number of applications in any month since the index began tracking the data in January 2009.

The head of lending at MAB, Brian Murphy, believes that the greater availability of suitable and affordable deals “will improve customer choice and provide more mortgages suited to a range of budgets.”

FOS consults on plans and budget for the year ahead

FOS has published its proposed plans and budget for the coming financial year with a view to getting comments by 2 February 2016. This will be of interest to those responsible for dealing with complaints.

In the current year, FOS has received 40,000 complaints relating to packaged bank accounts, 105,000 general casework complaints (not including PPI or packaged bank account complaints) and it is expected that 180,000 PPI complaints will be received by the end of the year.  Apart from PPI, banking and credit continue to generate the largest volume of complaints.

FOS has set out that it is planning to answer 1.7 million front-line problems and enquiries as well as continuing to tackle complaints relating to banking, insurance and investments. Some of the proposals include keeping the standard case fee at £550 for the fourth year. The number of free cases will remain at 25 and the PPI supplementary fee will continue to be zero. FOS has also proposed to reduce the cost of its service to the financial services sector with an operating income of £223.3million (slightly lower than the current year).

FOS consultation on possible changes to the time limits for PPI complaints

FOS has published proposed amendments to its scheme rules, affecting businesses subject to its voluntary jurisdiction.  FOS has two jurisdictions: 1) the compulsory jurisdiction (CJ) and; 2) the voluntary jurisdiction (VJ).  The FCA is responsible for making the rules that set the scope of the CJ and FOS is responsible for making rules that set the scope of the VJ.

The FCA is consulting on new rules that would set a deadline by which consumers would need to make their PPI complaints or else lose their right to have them assessed by firms or by FOS. FOS’ consultation is purely about these possible changes to the time limits for PPI complaints.  To keep the VJ rules aligned with the CJ and to avoid consumer and business confusion about the deadline, it thinks it would be appropriate to amend the VJ rules to mirror the proposed changes to the CJ time limits, subject to the FCA’s final rules.