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Dear CEO | Release Date: 11th March 2022

To read a shorter summary of this Dear CEO letter, click here.

To access the original FCA document, click here.

Long Summary

This communication from the Financial Conduct Authority (FCA) to Chief Executive Officers of Building Societies is a critical directive that outlines the supervisory strategy for managing and mitigating key risks in the sector. This letter builds on insights from previous reviews and recent challenges, particularly those posed by the COVID-19 pandemic. It aims to guide Building Societies in aligning their operations with FCA expectations, focusing on consumer protection, operational resilience, and regulatory compliance.

Introduction to Supervisory Context

The landscape for Building Societies over the last few years has been marked by unprecedented challenges, notably the global pandemic which has had profound impacts on operational capacities and consumer financial health. The FCA acknowledges these difficulties and provides a structured response to ensure societies are well-equipped to handle current and future challenges.

Detailed Analysis of Key Risks

1. Consumer Treatment

Vulnerable Customers: There is an imperative need for societies to enhance their understanding and support for customers in vulnerable circumstances. This includes ensuring access to necessary financial services and providing targeted assistance that addresses the specific challenges these customers face.

Interest-Only Mortgages: Concerns are highlighted regarding customers approaching the end of interest-only mortgages without viable repayment strategies. The FCA expects societies to actively engage with these customers to find feasible solutions to avoid potential financial distress.

Product Transparency: Ensuring that all financial products are designed with the consumer’s best interest in mind, accompanied by clear information and accessible dispute resolution mechanisms, is crucial for maintaining trust and integrity within the sector.

2. Operational Resilience and IT Security

Cybersecurity Measures: In response to the increasing cyber threats, societies must strengthen their cybersecurity frameworks and ensure robust protections are in place to safeguard sensitive consumer data and operational infrastructure.

LIBOR Transition: Societies are expected to manage the transition from LIBOR smoothly, ensuring all financial instruments, contracts, and associated products are adjusted without disadvantageous consumers or disrupting market stability.

3. Financial Crime Prevention

AML Regulations: Compliance with anti-money laundering regulations is non-negotiable. Societies must have effective systems to detect, report, and prevent financial crimes, ensuring alignment with national and international standards.

FCA’s Strategic Expectations and Supervisory Focus

Comprehensive Consumer-Centric Strategy

The FCA mandates a strong focus on consumer outcomes across all levels of society operations, insisting that consumer protection be ingrained in the corporate culture and decision-making processes.

Governance and Regulatory Compliance

Robust governance structures are essential. The FCA emphasises the need for societies to demonstrate leadership that prioritises regulatory compliance and fosters an organisational culture supportive of fair consumer treatment.

Enhanced Transparency and Effective Communication

Building Societies are encouraged to maintain high standards of transparency in their communications with consumers. This includes clarity in terms and conditions of financial products, awareness campaigns regarding consumer rights, and straightforward procedures for complaints and disputes.

Actions Required

Strategic Review and Implementation

Societies are directed to conduct thorough reviews of their current practices against the stipulated FCA expectations. Developing and implementing a comprehensive action plan to address any identified gaps is crucial.

Regular Reporting and Proactive Engagement

Ongoing dialogue with the FCA, including regular updates on progress and challenges in implementing the required actions, is crucial. Societies must ensure they engage proactively with the regulator, especially in addressing significant operational changes or compliance issues.

Continuous Training and Capacity Building

Continuous professional development for staff on regulatory standards, customer service excellence, and risk management is fundamental. This training ensures all employees are equipped to contribute positively to the society’s compliance and service objectives.


The role of Building Societies in the financial well-being of consumers is significant. By closely adhering to the FCA’s detailed regulatory framework and focusing diligently on enhancing consumer outcomes, societies can strengthen their operational resilience, maintain consumer confidence, and uphold the integrity of the financial market. The FCA commits to supporting Building Societies in these endeavours and expects strict adherence to its comprehensive supervisory strategy.

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