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Are you responsible? The widening of the regulatory net and treating customers fairly

butterfly-757960_1920The other week the FCA have formally launched their consultation paper on extending the Senior Manager & Certification Regime (SM&CR) to all firms they regulate.  Up to now, this has only applied to the banking sector.

From summer 2018, this is expected to apply to all FCA authorised firms.

The Purpose

The Senior Manager & Certification Regime is an evolution of the previous Approved Persons process and includes expectations and specific conduct rules. It has been live in the banking sector since March 2016.

This regulation has had the aim of ensuring a high degree of accountability for those in positions of influence, ensuring on an annual basis they are certified and fit to hold those roles.

Impact on all of us

Yet this is not just applicable to those in a Senior Management Function.  It also includes a catch-all for all other staff in non-standard functions.   This includes all the management, wider team and staff as well (with the exception of administrative staff); all employees of the authorised person.

FCA aims:

  • Encourage a culture of staff at all levels taking personal responsibility for their actions.
  • Make sure firms and staff clearly understand and can demonstrate where responsibility lies.

The changes mean there will now be a much wider group of financial services firms requiring compliance and adherence to the FCA Code of Conduct.  We are all impacted. Obviously the businesses moving to the new regime will be, but even those currently covered will have to deal with changes to be introduced as the coverage increases to all FSMA authorised firms.

Code of Conduct Rules

Under the regime, there are some specific standards of behaviour that apply to everyone, with some additional conduct rules for those in a Senior Manager function.


Individual conduct rules:

  1. You must act with integrity.
  2. You must act with due skill, care and diligence.
  3. You must be open and cooperative with the FCA, the PRA and other regulators.
  4. You must pay due regard to the interests of the customers and treat them fairly.
  5. You must observe proper standards of market conduct.

Senior manager rules:

  1. You must take reasonable steps to ensure that the business of the firm for which you are responsible is controlled effectively.
  2. You must take responsible 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.
  3. 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.
  4. You must disclose appropriately any information of which the FCA or PRA would reasonably expect notice.

Certainly, within the collections and recoveries industry, there is already considerable focus on each of these items today – integrity, skill, care and in particular treating customers fairly.

In this sense, there is no change; we are still expected to operate at a high standard.

There is a key change, however, as all financial services firms are now to be regulated, monitored and backed by sanctions for non-compliance.  The bar to diligently do the right thing, every time, is being raised.

Treating customers fairly

In Collections and Recoveries, we are commonly on the frontline of these situations, often talking with customers in difficult circumstances, trying to help and provide solutions. Treating customers fairly is at the forefront of our thinking and the code provides some examples of what could be considered a breach of standard.  For example:

  • Failing to inform a customer of material information in circumstances where they were aware or ought to be aware of such information, including:
    • Failing to disclose to a customer details of charges or penalties (esp. Investments)
    • Providing inaccurate or inadequate information to a customer about a product or service
    • Failing to process a client’s payment in a timely manner
    • Failing to acknowledge, or seek to resolve, mistakes in dealing with customers.


There are also prescriptive measures to monitor and assess situations of non-compliance.

  • Reviewing the individual circumstances of the case, considering the function where the person works and if there was personal culpability
  • Was the failure against the code of conduct deliberate, or below that deemed reasonable in all circumstances?

The Collections Perspective

Those of us in the collections and recoveries function are already at the sharp end of treating customers fairly and the industry has made great progress solidifying  our approach.  It is in many ways already ahead and embedding the culture needed.

However, this new legislation further widens the regulatory net, heightening the attention and focus on compliance.  It is expected to result in increased disciplinary action for those who do not comply.

All of a sudden all of the good work that has been done becomes more real, with very real-world consequences for non-compliance.   It is critical everyone in our teams is aware of the rules, and continues the good work started.

In some way though, this is also an opportunity.   Rather than generating fear from non-compliance, everyone in financial services with a good customer approach now has the regulator more clearly on side.

Doing the right thing, which is what most of us want to do already, has strong regulatory backing, hopefully opening the door to more positive changes for the Collections and Recoveries process.

Previously published at


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IFRS9… looming changes

paper-clips-2205135_1920There has been quite a bit written about IFRS9 recently. It seems as if the Collections and Recoveries world is waking up to the fact this is not just an accounting standard but will also impact our process. Implementation is suddenly seeming imminent.

For those who do not read international accounting standards for fun, IFRS9 is a pending change to how impairment for loss is calculated. We are ticking down to implementation in January 2018.

So what is changing?

Under the previous accounting standard (IAS39), recognition for credit losses was delayed until there was evidence of impairment. Additionally this was calculated only on past events and considered only current conditions.

Broadly, under the new standard, credit losses will need to be recognized at each stage of the customer lifecycle, even if no credit loss events have actually taken place. Market conditions will also now need to be taken into account. The portfolio will be split into two stages for the reserve calculation.

  1. No significant increase in credit risk since inception – Impaired at 12 month expected credit loss
  2. Significant increase in credit risk (a risk event) – Impaired at lifetime expected credit loss

This is all designed to enable the financial accounts to better reflect the inherent future inherent losses for customers on the book today. In some ways, this really does make a lot of sense as it should be more accurate.

But what does this mean?

Broadly speaking this means that losses will be recognised and more greatly provided for, much earlier in the collections cycle. There will be a greater cost of holding customers deemed to be higher risk. For these customers, there will be a significant step increase in provision (even at 30days past due).

As a result, generally the guidance being given is ‘contact earlier’, ‘more intensively’, to prevent customers moving to lifetime credit losses at this higher rate.

And, this makes sense. Contacting earlier, including pre-arrears, will undoubtedly prevent some forgetful customers falling 2 months in arrears and being deemed having increased in risk.

But this is not the entire story. Although 30dpd is being used as a general criteria, any external indicator can be used to indicate increased risk, Credit Reference Agency data, debt load, flagging of financial difficulties. The exact criteria organisations will use to determine an increase in risk (or indeed return to low risk) will require some judgement.

As collections and recoveries professionals, close to the portfolio on a day to day basis, it is one we will need to be involved in. For example, flagging a customer who has affordability issues may now result in a greater hit to the P&L. All of these dynamics need to be understood, it will be an interesting conversation.

Previously published at

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Fake news, the Bank of England and forming your own opinion

goat-1638961_1920Listening to the common narrative these days we hear a lot about being in the era of ‘fake news‘.

Whilst undoubtedly there is some ‘made up news’ around, much of the conversation online seems to be spent arguing about stories with selective use of facts and heavily influenced by personal opinion bias.

Even in what would be considered mainstream media it sometimes feels we have a battle of ‘fake news‘ vs ‘fake news‘, with audiences simply agreeing with the outlet that most confirms their own opinion.

One only has to look at the comments section in news reports to see the arguments rage.  Facts and balance seems to quickly get pushed out of the discussion after a few comments.  They frequently degrade to the hurling of insults.

Data rich, time poor

This is frustrating, and somewhat ironic that it is happening in an era where there is more information readily available than ever before.

In many ways, our challenge is not getting the facts, but getting the time to review the data, consider it and form our own opinion.  In a time challenged world, it is all too easy to look for shortcuts and as a consequence be influenced other peoples opinion, not form your own.

Bank of England

A good example is the data from the Bank of England.  There are a couple of reports that are always worth a read.

They often contain interesting data and insight, the pieces just need fitting together.

The latest set of publications is no different and tell an interesting story.

The ‘lets go shopping’ economy

Post EU-Brexit vote, the population collectively seems to have decided… ‘let’s go shopping’.

Maybe it was buying now in anticipation of prices going up, or for others just a sense of empowerment spilling over into retail purchases.  Either way the reaction has been one of retail therapy, generating a boost to the economy.

However, looking deeper, this appears to be being fuelled by an expansion of consumer borrowing.

Even more concerning is the extent to which material prices are going up.  We may not have felt this at the supermarket yet (although it did seem like there was less tea in my tea bag this morning, and my chocolate bar is smaller…!), however it appears there is something on its way.

Pipeline risks

Pulling this all together it feels there are a few key risks in the pipeline.

Undoubtedly an unusual set of dynamics at play here and despite a relatively benign environment the last few years, it appears the data is showing a change.

Now is the time to get ready, and have a strategy.

Freedom to form your own opinion

The BoE data is interesting, and this is at least is my opinion….!

By all means listen to others, however be it Economics, Climate Change, Government spending or a subject of your choosing, it is well worth finding the time to source the data, keep an open mind and form your own opinion.

In the current environment that is a very valuable commodity indeed.



BoE data and graphs below, to help form your own view..!

Retail Confidence has been up – Confidence shopping


This, together with the weakness in the pound, has helped drive manufacturing demand.

1CAB46E1-E488-4E67-AE5B-8A3E18704B33…and this ‘confidence’ is spilling over to hiring intentions and ‘potential’ for new jobs.

C785D06F-DDFF-473B-9554-030C5129D08CHowever….  in order to fuel this spending we have been borrowing more, with the industry lending more (including higher LTV lending)

Credit Cards


Motor finance



…. yet…. all the while underlying input prices are going up.


(all data BoE from datasources linked above)


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