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FCA head highlights big issue of housing finance for young people

  • 14/05/2019
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FCA head highlights big issue of housing finance for young people
Financial Conduct Authority (FCA) chief executive Andrew Bailey has warned that the regulator must not get distracted with Brexit and must concentrate on other big issues in the industry.


Bailey highlighted that inter-generational issues, including access to housing finance for younger people, was one of the issues he was most concerned about.

The head of the regulator also warned firms they could not switch off from cyber security and that firm management should not ignore internal issues such as discrimination and sexual harassment.

Speaking in an interview with FCA head of business and consumer communications Emma Stranack, Bailey discussed the regulator’s annual business plan published last month.

However, he did not raise the investigation into parts of the second charge and subprime credit markets which was announced in the business plan.


Brexit dominating other big issues

Bailey noted that preparation for Brexit was ongoing and one of the most intense drivers of work.

He said Brexit was creating “unique uncertainty” and that given the state of the situation there were “going to have to be quite a lot of on-the-run adjustments to the FCA’s plan”.

He later said: “We’re trying to balance a very big Brexit agenda with the rest of the agenda, there are a lot of very important issues that are not Brexit.

“I’m very concerned that we must not lose sight of these other big issues.

“We’ve got big issues around, for instance the inter-generational issues in this country and how financial services is a part of that – pension saving, indebtedness. [And at the] younger end of population – access to housing finance.”

Bailey added that he wanted to make sure the regulator could demonstrate progress on these other big issues.

“I do think our society needs to see that progress and frankly that there are solutions and approaches coming out of bodies like the FCA, but we can’t do it alone, because I think the public will be very disappointed if we lose sight of these other issues,” he said.


Tackling discrimination and sexual harassment

Concerns around culture and governance have also been at the forefront for the regulator, with the implementation of its Senior Managers and Certification Regime (SM&CR) and its consultation on a duty of care.

Bailey warned that customer treatment and outcomes could not be divorced from how firms ran their culture and governance internally.

And he highlighted that management needed to tackle issues such as discrimination and sexual harassment.

“When we see issues around conduct within firms, concerns about discrimination, frankly some areas such as sexual misconduct come up,” he said.

“People ask why is that relevant to the FCA, given your statutory responsibilities are all about conduct towards customers?

“I’m afraid that to me is obvious. What you do inside your firm and how you behave will have an effect on our objectives, so please don’t think we are going to ignore what goes on.

“And moreover, we expect management not to ignore it,” he added.

Bailey acknowledged that from feedback there was recognition that a formal legal statutory duty of care “would be a difficult thing to do and might not hit the target”.

“But the clear message is there’s a lot more we can do using our principles directly. Of course at our heart is Treating Customers Fairly – we will take that work forward,” he said.


Cyber risks continually evolve

Technology and data security was another area of importance Bailey raised during the 20 minute interview, highlighting that there have already been some “quite difficult and painful experiences” on this front.

“It’s therefore very important that firms are very active on this one,” he said.

“One of the things about operational risk, especially cyber, is that it’s never over – there’s no conclusive action that one of us can take because it continually evolves and mutates.

“When we talk about firms future-proofing their technology, they have to do everything they sensibly can do and have to subject themselves to rigorous testing.”

Bailey noted that the FCA itself was increasingly requiring very rigorous testing of systems and added that firms have to adopt the mindset that doing it once is not the solution.

“As far as we can see it will not decline as a priority because it continually evolves,” he added.


Vulnerable consumers

Bailey also confirmed that the regulator’s proposed guidance on identifying vulnerable consumers would be published in the summer.

He noted that it was understandable that firms should be looking towards the FCA to translate the definitions into practice.

“We’ll work closely with all groups in that respect,” he said.


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