FCA updates financial crime reviews: FCA has carried out further reviews on:
- how small banks manage money laundering and sanctions risks; and
- how insurance brokers manage bribery and corruption risk.
The reviews were updates of previous thematic reviews. FCA is disappointed that, despite the criticisms it made in the previous reviews, the text of the Financial Crime guide that followed them and the high profile enforcement actions that also followed each review, many of the participants in the surveys had taken no, or too little, action to improve their procedures. For further information, see our detailed article. (Source: FCA Updates Financial Crime Reviews)
FCA and PRA fine banks for IT failures: In their first joint enforcement action, FCA and the Prudential Regulatory Authority (PRA) have fined RBS, NatWest and Ulster Bank Ltd a total of £56 million (£14 million from PRA, £42 million from FCA) for the IT failures in 2012 that left customers unable to access banking services. The problems included inability to access cash or meet commitments, and the banks producing inaccurate statements and applying incorrect interest. The problems lasted for several weeks, and were caused by a software compatibility problem. FCA found the underlying cause was a failure by the banks to put in place adequate systems and controls to identify and manage their exposure to IT risks. FCA noted that the failure did not result from insufficient investment in IT, and that since the incident the banks had taken significant steps to improve resilience. FCA and PRA are now seeking further detail from bank chairmen on how well banks are managing their IT risk, as a follow-up to their "Dear Chairman" exercise in 2012. (Source: FCA Fines Banks for IT Failures and PRA Fines Banks for IT Failures)
PSR consults on payment systems regulation: The Payment Systems Regulator (PSR) has published the responses it received to its call for input on payment systems regulation and its proposals for how it will regulate going forwards. The detailed consultation sets out proposals on:
- industry strategy: there will be a Payments Strategy Forum comprised of industry and service-users. The PSR also plans a market review into the ownership and competitiveness of infrastructure provision in the first half of 2015;
- ownership, governance and control of payment systems: The PSR will require all operators to ensure service-users have appropriate representation in decision-making. It will also address conflicts of interest so that individuals are not simultaneously a director of an Interbank Operator and of a Central Infrastructure Provider to the same payment system. It will also require all Operators to publish Board minutes and votes and to report to the PSR annually on compliance with its service-user direction;
- direct access to payment systems: The PSR will require Operators (of Bacs, C&CC, CHAPS and FPS) to have objective, risk‑based, and publicly disclosed Access Requirements, which permit fair and open access. LINK, MasterCard and Visa are already subject to an access rule under the Payment Services Directive and will have to publicly disclose their Access Requirements. The PSR will require all Operators to report annually on compliance with the access rules that apply to them;
- indirect access to interbank systems: Sponsor Banks will have to publish information on the sponsor services they offer and the PSR will ask the industry to develop a Code of Conduct that it will approve. It plans a market review into Indirect Access.
- interchange fees: The PSR will work to implement the EU Interchange Fees Regulation but will consider earlier domestic action if there is delay at EU level; and
- regulatory tools: The PSR plans Principles on its expectations of industry behaviour, and will expect continuous dialogue with industry (so there are "no surprises"). There will be Powers and Processes Guidance setting out the PSR's enforcement and complaints procedures, Guidance on its statutory Objectives, Penalties Guidance and our Administrative Priority Framework.
FCA hints at informal guidance: FCA has published a note relating to Project Innovate, which sets out a disclaimer when FCA staff give informal advice on an innovation. It explains that the advice is not formal guidance and that FCA is not bound by it and can change its view at any time. (Source: FCA Hints at Informal Guidance)
FCA speaks on regulation in a recovery: John Griffith Jones has spoken on the importance of structure, clarity, effectiveness and continuous improvement in regulatory models. Among his key points were that although FSB has made great progress on the "too big to fail" debate, less has been done on "too big to behave badly". He also noted the importance of the Principles and said it is right that most enforcement action stems from a breach of Principle. While rules are useful, he favours the "less is more" approach, both because of the importance of principle and because longer rules sometimes confuse rather than clarify. He also said early intervention and deterrence are the right strategy and work well. (Source: Regulating in a Recovery)
FCA speaks on redefining conduct regulation: Martin Wheatley spoke on how surveys and statistics show how customers behave when given, or not given, certain information about products. He commented on how the conclusions from behavioural economic research can inform regulators on, particularly, disclosure requirements. (Source: FCA Speaks on Redefining Conduct Regulation)
Regulators agree information sharing: FCA, PRA and HM Revenue and Customs (HMRC) have agreed an information sharing approach following a recommendation of the Parliamentary Commission on Banking Standards. (Source: Regulators Agree Information Sharing)
FCA creates benchmark pages: FCA has created a set of new pages on its website looking at benchmarks and its supervisory and enforcement powers in relation to them. (Source: FCA Creates Benchmark Pages)
FCA publishes complaints handling review: FCA has published the results of a thematic review into how firms deal with consumer complaints. The survey looked at a sample of 15 banks, building societies and insurers, and sought input from industry bodies, consumer bodies and the Financial Ombudsman Service (FOS). It looked at how firms dealt with complaints in practice and at their documented policies, procedures and management information (MI). It excluded payment protection insurance complaints handling from the review. On the whole, the review found firms had improved their handling of complaints, but there are still barriers to fair complaints handling and consistent consumer outcomes. FCA analysed each stage of complaints handling - identifying a complaint, recording it, internally reporting it, providing redress and carrying out a root cause analysis - and found ways in which firms could improve each stage. (Source: FCA Publishes Complaints Handling Review)
FCA fines for Keydata sales failings: FCA has fined Chase de Vere £560,000 for failures in its sales of Keydata products. It found the firm did not research the products well enough to understand the risks they presented and therefore could not properly describe them to customers. FCA said that had it done this, it would have recognised it needed to place additional controls and restrictions on potential sales to customers with a cautious attitude to risk. Many customers have already made a claim to the firm or to the Financial Services Compensation Scheme, and the firm has agreed to review its sales to any customer who has not yet complained and to provide redress if appropriate. (Source: FCA Fines for Keydata Sales Failings)