Culture and Governance
What does the FCA say?
"The Duty sets a higher expectation for the standard of care that firms give customers. For many firms, this will require a significant shift in both culture and behaviour, so they consistently focus on customer outcomes, and put consumers in a position where they can make effective decisions."
FCA Expectations and What this Means for You?
- Ensure that you have nominated your Consumer Duty Champion
- Think about what training SMF’s, CI’s and other colleagues will need so that everyone understands their specific roles in delivering Consumer Duty
- Make sure your remuneration and incentive structures promote the right behaviour in your staff and delivers good customer outcomes.
- Work out what changes are needed to your monitoring activities, including what additional evidence you will need to show compliance
- Revisit your policies and procedures to ensure that they are delivering good outcomes for customers
- Consider any other ways in which your culture and governance needs to change to support the delivery of good customer outcomes
Conduct Rules
Individual Conduct rules
- You must act with integrity
- You must act with due skill, care and diligence
- You must be open and cooperative with the FCA, the PRA and other regulators.
- You must pay due regard to the interests of customers and treat them fairly.
- You must observe proper standards of market conduct
The Consumer Duty includes a sixth individual Conduct Rule requiring all staff (except ancillary staff) to:
6. You must ‘act to deliver good outcomes for retail customers’.
Senior Manager Functions (SMFs) have four additional conduct rules:
- You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.
- You must take reasonable steps to ensure that the business of the firm for which you are responsible complies with the relevant requirements and standards of the regulatory system.
- You must take reasonable steps to ensure that any delegation of your responsibilities is to an appropriate person and that you oversee the discharge of the delegated responsibility effectively.
- You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice
Steps We've Taken.
Using a team of experts from across our business, we have analysed the ‘Culture, Governance and Accountability’ section of the FCA’s non handbook guidance.
These focus around the four drivers for culture and we have taken some steps outlined below:
Purpose: Ensuring the principles of the business are consistent with the duty and are embedded into the culture. We've implemented training with specific reference to Consumer Duty and how this fits within our culture.
Leadership: Senior Management understanding their role within the duty and committing to making this a key focus for them, and the rest of the business. We've updated the Senior Management Function Responsibilities Map and updated our committee structures and reporting.
People: Ensuring that the way people are managed and rewarded is in line with driving good outcomes for customers. We have included references to Consumer Duty within Staff Objectives so that we can deliver good customer outcomes.
Governance: Ensuring there are controls in place to monitor the delivery of good outcomes for customers, but also having processes to flag where this could be improved. We have reviewed key Policies, Processes and Monitoring to test their effectiveness at promoting good outcomes for customers.
Our Consumer Duty Champion is appointed and we have a regular Consumer Duty Steering Group to monitor progress and provide regular updates and escalations to our Board regarding Consumer Duty.
FAQ's
Q) What does the FCA mean by Culture and Governance?
Q) Where can I find the Culture, Governance and Accountability section in the FCA guidance?
Q) How is Consumer Duty different from TCF?
Q) What do I need to do annually?
Q) What training resources are available?
A) Culture is the set of beliefs and behaviours that guide how a company’s management and employees interact to ensure that it operates in the right way to achieve good outcomes for customers. Governance is the structure of rules, practices, and processes used to direct and manage a company.
A) This can be found in section 10 of the Final non-Handbook Guidance for firms on the Consumer Duty.
A) TCF ensured that firms had the right infrastructure, culture and framework in place to promote the fair treatment of customers and to show “that fair treatment of customers is at the heart of their business model”. Consumer Duty differs in that it’s not about showing the FCA that processes and frameworks are in place but proving how effective they are in delivering good outcomes for customers.
A) A firm’s board, or equivalent governing body, should review and approve an assessment of whether the firm is delivering good outcomes for its customers which are consistent with the Duty, at least annually. This should include such things as – monitoring activities, actions taken and firm’s business strategy. This will form part of the evidence the FCA use to assess compliance with the Duty and would expect the data that sits behind it be available on request.
A) Refer to FCA webinars and Information for Firms and further communications available through the Portal
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