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Dear CEO | Release Date: 11th March 2022

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

To access the original FCA document, click here.

Short Summary

In response to the evolving challenges within the financial market due to the pandemic, the Financial Conduct Authority (FCA) has issued a comprehensive “Dear CEO Letter” to Retail Mortgage Lenders (RMLs). This letter highlights the FCA’s commitment to a transformational approach, focusing on innovation, effective data utilisation, and rapid responsiveness to market changes such as digitalisation and shifting consumer needs.

The FCA stresses the importance of being assertive and adaptive in utilising its regulatory powers to address issues beyond its traditional perimeter, as demonstrated during the pandemic when guidance facilitated the deferral of 1.8 million mortgage payments. The letter reminds CEOs of the ongoing impacts of the pandemic, urging continued vigilance in supporting consumers facing financial difficulties while also addressing risks like interest-only mortgages nearing maturity.

Specifically, the FCA delineates its expectations for RMLs over the next two years, which include managing the fallout from the cessation of pandemic-related support measures, ensuring responsible lending practices amidst economic pressures like inflation and rising interest rates, and progressing with the LIBOR transition. Additionally, the letter addresses the need for robust management of customers in vulnerable circumstances and the imperative to integrate diversity and inclusion within business models and customer interactions.

The FCA also updates on its strategies and expectations concerning environmental, social, and governance (ESG) factors, Brexit transition preparations, and supporting ‘mortgage prisoners’—borrowers stuck in disadvantageous mortgages.

Key take-aways

Reflect on your firm’s alignment with FCA’s expectations, particularly in tailoring support to customers facing financial challenges post-pandemic and managing interest-only mortgages nearing maturity. Ensure your strategies incorporate responsible lending and compliance with new regulations, including those related to the LIBOR transition and ESG factors. Prepare to demonstrate proactive management and fair treatment of vulnerable customers, embedding these principles deeply within your firm’s operations and culture.

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