Dear Chief Executive | Release Date: 5th February 2021

To read a longer summary of this Dear Chief Executive letter, click here.

To access the original FCA document, click here.

Short Summary

The Financial Conduct Authority (FCA) has issued a supervisory strategy letter to retail banks, underscoring the heightened challenges due to the economic impact of COVID-19. The letter highlights the critical role banks play in supporting consumers, especially those facing financial difficulties, and outlines the FCA’s expectations for banks to manage risks and ensure customer-centric practices during these turbulent times.

Key risks identified include increased customer vulnerability and potential financial hardship exacerbated by the pandemic. The FCA emphasises the importance of fair treatment of borrowers, transparent communication, and robust governance, especially as banks navigate significant business changes and operational shifts.

The letter delineates four priority areas for FCA supervision over the next two years:

• Ensuring fair treatment of borrowers by implementing effective forbearance measures and safeguarding consumer interests.
• Maintaining strong governance and oversight during business transformations to protect customer outcomes and service quality.
• Enhancing operational resilience to manage risks associated with increased online banking and technological changes.
• Minimising financial crimes such as fraud and money laundering through improved controls and vigilant oversight.

Banks are expected to critically assess their practices, align their strategies to mitigate these risks, and prepare to demonstrate their compliance efforts. The FCA stresses the need for proactive engagement and remediation where necessary.

Key Take-aways and Actions:

Retail banks should review and adjust their operational strategies in line with FCA guidelines to enhance customer outcomes and ensure resilience. Boards must ensure that the bank’s actions comply with regulatory expectations and are prepared for FCA interventions if compliance gaps are identified. Banks must engage continuously with the FCA, particularly in managing the anticipated challenges, to maintain trust and stability in the financial system.