On 7 August 2025, the Financial Conduct Authority (FCA) published its findings from a review of transaction governance in wholesale banks.

Background

The FCA explained that it considers that a clear framework and governance process for considering risks arising from transactions is an important aspect of risk management for wholesale banks.

The FCA set out that it had reviewed the relevant processes in six wholesale banks and, while it did not find widespread weaknesses in transaction governance, that some banks had more robust processes than others.

Findings

The FCA gave examples of good and poor practice in a range of areas including:

  • Risk appetite: The FCA highlighted that approaches to reputational risked were particularly varied, with some firms setting out their risk appetite in detail, defining it both qualitatively and quantitatively and with clear escalation thresholds and risk appetite monitoring, while in other firms reputational risk received only cursory treatment in risk appetite statements, which the FCA considered increases the risk of inconsistent decisions where reputational risk appetite is poorly defined.
  • Overall framework and process: The FCA noted that transaction governance structures varied across firms, reflecting business models and group structures, but that all firms (except one) could provide an organogram and process charts in relation to transaction governance that seemed to be well understood, but that one firm had struggled to provide this information.
  • Pre-committee stage: The FCA stated that in all firms most of the ‘deal screening’ took place at this stage, and that while one firm stood out for its comprehensive documentation, other firms generally did not document these early-stage discussions well. The FCA highlighted that, while it doesn’t mandate an approach, that senior managers may want to consider whether they are comfortable with the balance between encouraging early-stage views from stakeholders and the tracking of those early-stage discussions.
  • Committee stage: The FCA reminded firms of the importance of making decisions with a quorate committee and that committees are chaired in a way that avoids conflicts of interest. The FCA also explained that better deal memos showed an explanation of the business case and risks of a transaction set out by the first line of defence and also showed challenge and an enhanced risk assessment by the second line of defence, but that less satisfactory deal memos appeared to be tick box exercises. The FCA also highlighted that, where transactions are approved by email, senior managers ought to consider what information should be included and whether the transaction should be subject to offline review. In addition, the FCA reminded firms that clear comprehensive minutes of committee meetings strengthen accountability.
  • Conditions: Previous reviews identified weaknesses in tracking conditions that had been attached to transaction approvals, but the FCA set out that this review found that committees generally ensured conditions were met and that firms were using technology to enhance record keeping and tracking, including creating barriers to execution, as part of their approach.
  • Engagement of senior executives and the board: The FCA made clear that, while better firms demonstrated evidence of comprehensive management information (MI), in other cases timely MI on reputational risk arising from transactions was not provided and there were also failures to properly document this type of risk.
  • Cross-border transactions: The FCA found that in most cases UK representatives could impose conditions or veto decisions and could demonstrate effective risk acceptance in relation to cross-border transactions that would be booked in the UK, but that in one case UK representatives were not well integrated into this process.