The FCA has published a speech given by its chief executive Andrew Bailey at the BBA Retail Banking Conference. The speech is entitled reflections from the FCA.
Highlights in the speech include:
- the big lesson from Northern Rock is the importance of understanding business models and where banks earn their returns and how stable those returns are;
- retail banks are complex because they provide consumers with many products, which can be very long lived and there is scope for cross-subsidiaries between products and between customers; and
- the FCA is undertaking a strategic review of retail banking business models focusing on links between different products and services and their relative profitability.
In relation to the FCA’s strategic review of retail banking business models Mr Bailey mentions that:
- it is very much a piece of discovery work to start with, focusing on links between different products and services and their relative profitability. This includes the impact on different groups of customers;
- it is very much an empirically driven piece of work which picks up where the Competition and Markets Authority (CMA) left off, but is not a full evaluation of the functioning of competition in retail banking markets. It is broader in scope than the CMA’s work, which focused on personal current accounts and SME banking. The FCA is covering both sides of the balance sheet of banks – deposit taking and lending; and
- the FCA is also taking action on the recommendations made to it by the CMA following their investigation into retail banking. Mr Bailey states that the FCA is making good progress on these recommendations which include measures to improve service and increase customer engagement with their current account. The FCA will bring forward the first set of proposals on service metrics shortly.
Mr Bailey also mentions that during the summer the FCA will publish its findings concerning its review on the price cap on short-term high-cost loans which came into force in January 2015. Another piece of work that will appear in the near future will be a thematic review which responds to a recommendation from the Parliamentary Commission on Banking Standards report in 2013 that banks should assess customers understanding of the products and services they deliver.
View Andrew Bailey speech on retail banking in the UK – reflections from the FCA, 29 June 2017