Accountability, escalation and risk-based decision making in Building Societies

Accountability  escalation and risk-based decision making in Building Societies

This blog is part of a series of insights on Building Society risk management.

In the last year, an increasing number of supervisory reviews performed by the Prudential Regulation Authority (‘PRA’) in the sector have commented on the extent to which risk management is properly embedded within the first line of defence. The root causes behind the level and strength of comment made by the PRA have generally been driven as a result of, one or more of, the following:

  • business functions within the first line of defence not having properly considered risk when conducting their day-to-day operations, as they see ‘risk’ as a second line responsibility;
  • firms having routinely overridden their own systems and controls (i.e. routinely permitted exemptions to key credit criteria to lend disproportionately outside of lending policy);
  • key issues not being brought to the attention of relevant Board sub-committees and the Board on a timely basis, or in some cases, at all; and
  • a lack of an appropriate culture to manage risk in line with the Board’s risk appetite and prudent management more generally.

Continue reading

Posted on 02/01/2018 | 0 Comments

Insurance Capital Standard (ICS) – was any meaningful progress made in Kuala Lumpur?


In our recent blog, we took stock of efforts to establish a global capital standard for insurers ahead of the IAIS annual conference in Kuala Lumpur1 . This follow-up assesses what, if any, progress was in the event made on the ICS against the three key issues that we highlighted in our last blog as being the most important for the IAIS to resolve, and hence “assays” of the degree of progress achieved, namely:

  • a single valuation basis;
  • the incorporation of internal models into the ICS framework; and
  • a satisfactory approach to the MOCE (the margin over current estimate, equivalent to the risk margin in Solvency II).

Continue reading

Posted on 20/12/2017 | 0 Comments

The FCA’s Latest Approach Documents on Competition and Authorisation: What You Need to Know


When the Financial Conduct Authority (FCA) launched its Mission earlier this year, it promised to publish a series of documents that would explain its approach to regulation in more detail. (See our blog on the FCA Mission and Business Plan.) The FCA published its draft future approach to consumers document last month (see our blog on vulnerable consumers in this context) and has in the last few days published two further draft approach documents on competition and authorisation.

Continue reading

Posted on 19/12/2017 | 0 Comments

Transitional Proposals for the extension of the Senior Managers and Certification Regime

Senior Managers and Certification Regime

On 13 December 2017, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) issued a suite of Consultation Papers providing further guidance on how they plan to transition firms and individuals to the Senior Managers and Certification Regime (SMCR). The FCA’s CP 17/40 also provides further information on the implementation of the new Prescribed Responsibility regarding Conduct Rules.

Continue reading

Posted on 15/12/2017 | 0 Comments

What’s next for the role of compliance in wholesale banking?


On 23 November, the FCA published a report on the compliance function in wholesale banks. In January this year, the FCA sent a questionnaire to 22 wholesale banks asking for information about their compliance function. The firms included large global banks operating across several business lines, medium-sized firms that focus more on specific geographies, and firms with a less significant UK footprint. The range of firms surveyed was broad, as illustrated by responses to the FCA’s question on the number of revenue-generating front-office roles in wholesale banking businesses: figures ranged between two and 3,115.

Continue reading

Posted on 13/12/2017 | 0 Comments

Understanding the impact of the transition from LIBOR

Understanding the impact of the transition from LIBOR

In July 2017, the UK Financial Conduct Authority (FCA) reported that the London Interbank Offered Rate (LIBOR), will be phased out as the interest rate index used in calculating floating or adjustable rates for loans, bonds, derivatives and other financial contracts by the end of 2021. LIBOR underpins approximately $300 trillion in financial products and is one of the most significant reference rates used by financial market participants.

Continue reading

Posted on 12/12/2017 | 0 Comments

Five things to remember about Basel III


After more than a year of stalled negotiations, the Basel Committee on Banking Supervision (BCBS) announced an agreement on the remaining elements of the Basel III post-crisis bank capital framework. Striking a deal on this package of reforms (often called ‘Basel IV’) is a significant milestone in the post-crisis regulatory journey and a huge achievement for the BCBS.

The announced framework bridges a gap – particularly between American and European regulators – on the extent to which banks can use internal models to determine their capital requirements.

Continue reading

Posted on 08/12/2017 | 0 Comments

PSD2 standard on secure communication: a balancing act


Earlier this week, the European Commission published the final Regulatory Technical Standard (RTS) on Strong Customer Authentication and Common Secure Communication under the revised Payment Services Directive (PSD2). In this final version, the Commission confirmed that screen scraping[1] will no longer be allowed once the RTS comes into effect, heeding concerns expressed by the European Banking Authority (EBA) and other stakeholders around security. However, Account Servicing Payment Service Providers (ASPSPs) will still be required to put in place contingency measures in case of unavailability or under performance of their dedicated interfaces during a communication session with Third Party Providers (TPPs).

Continue reading

Posted on 01/12/2017 | 0 Comments

A question of appetite and tolerance – Building Society risk management

Building Society risk management

This blog is part of a series of insights on Building Society risk management.

A key ongoing consideration for the Senior Management of Building Societies is risk appetite and tolerance, and the Society's adherence to it. The question of risk appetite and tolerance has been on the agenda of Board's and regulators for some time now; however, the level of focus given to this in recent years has now increased to the point where no Board or Board sub-committee meeting fails to touch on this in some way.

Continue reading

Posted on 01/12/2017 | 0 Comments

An introduction to the FCA’s focus on vulnerable consumers

FCA’s focus on vulnerable Consumers

The importance the FCA places on protecting vulnerable consumers has become increasingly clear with the recent publication of its Financial Lives and draft FCA Mission: Our Future Approach to Consumers documents. Throughout these documents, as well as in its Business Plan and Mission Statement (both published in April) the FCA emphasises its clear operational commitment to prioritising the needs of the most vulnerable and least resilient consumers.

Continue reading

Posted on 22/11/2017 | 0 Comments

Extension of the Senior Managers and Certification Regime : Proposed changes for insurers

Extension of the Senior Managers and Certification Regime  Proposed changes for insurers

Insurers set to be captured by enhanced Senior Managers and Certification regime from 2018.

In July, the PRA and FCA released their highly anticipated consultation papers (FCA CP17/26 and PRA CP14/17) setting out their proposals to extend the Senior Managers and Certification regime (“SM&CR”) to insurers from 2018. In this blog, we explore the most significant changes affecting insurers and steps that firms can take to prepare for the new regime.

Continue reading

Posted on 20/11/2017 | 0 Comments