FSA has written to firms explaining:

  • FCA’s approach to supervision;
  • the firm’s conduct and prudential category;
  • what this means for the firm; and
  • the next steps.

It confirms there are four classifications in each of the conduct and prudential categories and will write again in April to firms that will have a dedicated supervisor, telling them who the supervisor will be. For the conduct (C) categories, C1 and C2 firms will have a dedicated supervisor, with C1 firms on a one year cycle and C2s on a two year cycle. They should expect two “deep dives” during this period. C3 firms will be assessed to see how their businesses are run and controlled, with FCA paying particular attention to those that are outliers compared to their peers. C4 firms will have one “touch point “every four years. For the prudential (P) categories, those classed as P1 and P2 (prudentially significant firms) will have a periodic assessment of their capital and liquidity requirements. FCA will focus on monitoring alerts for P3 firms and will put within P4 firms which require a differentiated approach to prudential supervision because of their specific circumstances. (Source: FCA Classifications Letter and FAQs on FCA Supervision)