In 2015, the FCA introduced its 5 Conduct Question (5CQ) programme for wholesale banks in order to help them improve their conduct risk management and, ultimately, drive cultural change.
The 5CQs are:
- What proactive steps do you take as a firm to identify the conduct risks inherent within your business?
- How do you encourage the individuals who work in front, middle, back office, control and support functions to feel and be responsible for managing the conduct of their business?
- What support (broadly defined) does the firm put in place to enable those who work for it to improve the conduct of their business or function?
- How does the Board and ExCo (or appropriate senior management) gain oversight of the conduct of business within their organisation and, equally importantly, how does the Board or ExCo consider the conduct implications of the strategic decisions that they make?
- Has the firm assessed whether there are any other activities that it undertakes that could undermine strategies put in place to improve conduct?
On 28 May 2019, the FCA published its latest feedback report on the 5CQ programme. While the report covers FCA supervisory activity and discussions with a sample of about 50 firms, the content is relevant for all firms in the financial sector, wholesale or otherwise. The FCA encourages all firms to note the feedback provided in the report as well as the broad conduct agenda and consider if and how they can effectively incorporate any of the approaches in their own organisations. The report is relevant to boards and non-executive directors, to staff at all levels, clients, and to other stakeholders.
The report is divided into three sections:
- section 1 takes a high-level look back over several years to identify strategic factors that may help firms reframe, extend or energise their efforts relating to conduct risk management;
- section 2 gives an update on industry progress against each of the 5CQs, based on the FCA’s observations over the past year and provides a catalogue of good practice ideas; and
- section 3 provides a brief assessment of ‘speak up’ and whistleblowing initiatives in wholesale banking.
