The FCA has published Thematic Review 15/4: Governance over mortgage lending strategies (TR15/4).

In TR15/4 the FCA sets out the findings from its thematic review which assessed the quality of firms’ governance from a conduct perspective, when setting or amending lending strategies. The thematic review included ten regulated firms, varying in types and sizes, including banks, building societies and smaller niche lenders.

Throughout TR15/4 the FCA refers to culture, governance and conduct risk. The FCA’s expectations for culture, governance and conduct risk are:

• the FCA expects firms to have a culture that places customers, market integrity and competition at the heart of their business. Culture is evidenced through the way firms conduct their business, what they expect of their staff and their attitude towards customers. Firms must evidence such culture exists and is applied from the top and throughout all layers of the firm;
• the governance of firms is the process of decision-making and the process by which decisions are implemented by senior management and boards. The FCA expects boards to be able to clearly explain the conduct risks within their own strategies, understand their own management information and how it influences good customer outcomes; and
• the FCA sees conduct risk as the risk that firm behaviour will result in poor outcomes for customers. A firm’s conduct risk profile will be unique to it, and there is no one-size-fits-all framework that can assess it. The FCA expects firms to be looking at their own business models and strategic plans to see if they are identifying, mitigating and monitoring the consumer risks arising from them. They need to be considering customer outcomes equally alongside commercial objectives.

View Thematic Review 15/4: Governance over mortgage lending strategies (TR15/4), 19 March 2015