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The FCA's approach to supervision guide

The FCA’s approach to supervision guide

With the taking over of the regulation of consumer credit firms, the FCA is now the conduct regulator for over 56,000 firms, and of these, for 24,000 firms it also acts as their prudential regulator. As a result, in October 2015, the FCA communicated a change in its approach to supervision. Firms are now categorised as either fixed portfolio (the largest firms and groups) or flexible portfolio (all other firms).

Furthermore in order to ensure that it fulfils its statutory objectives the FCA also has in place a supervisory model which is built upon three pillars of supervision activity:

  • Pillar 1 which catches the fixed portfolio firms where there is a close relationship and firm-specific supervision and regular proactive contact;
  • Pillar 2 which is event driven and reactive, usually when a situation arises at a firm which requires supervisory investigation or action, this can impact on fixed and flexible portfolio firms; and
     
  • Pillar 3 which is based on thematic work focusing on the risks and issues within a sector, again with fixed and flexible portfolio firms.

This handy guide takes you through the different elements of the FCA’s supervision model and explains the areas of focus for the FCA.

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David Saunders, Partner