FCA expectations


The FCA recently published a ‘Dear Board of Directors’ portfolio strategy letter’ to all firms who outsource to third party mortgage administrators and to third party administrator firms.  It set out the FCA’s concerns in respect of key risks posed to customers and detailed how firms should address and mitigate those risks.  On the face of it, the guidance appears to be a highly focused and targeted warning to specific firms.  But actually, it is a worthwhile read for any FCA regulated firm as the issues highlighted are not unique to those specific firms.  All regulated firms should heed the warnings contained within the letter!

On the face of it, the guidance appears to be a highly focused and targeted warning to specific firms. 

There are four particular themes that all regulated firms should review and reconsider.

  • Fair treatment of customers

I am sure all regulated firms know that the FCA focuses on six consumer outcomes.  These are the outcomes that firms should strive to achieve in all their dealings with customers, to ensure fair treatment of all customers.   Equally, I am sure I don’t need to reproduce the six outcomes here; space doesn’t allow it anyway!  But seriously, post COVID, it is well worth refocusing on these outcomes – they have stood the test of time and are equally as important today as they were when first published.  I would encourage all regulated firms to carry out a ‘gap’ analysis of their current performance against these outcomes and then develop a plan to close the gaps.

  • Vulnerable customers

The requirement to achieve good outcomes for vulnerable customers is not a new theme for the FCA.  The best way for firms to satisfy FCA requirements is to ensure that they understand the needs of their target market, that their staff have the right skills and capabilities to recognise and respond to the needs of vulnerable customers, ensure that products meet the needs of their customers and ensure that there are measures in place to monitor and assess whether they are meeting and responding to the needs of their vulnerable customers.  Government has also published a ‘vulnerability’ toolkit.  This is designed to ensure that front line staff recognise vulnerable customers and that they apply appropriate safeguarding measures so that such customers are “handled with compassion”.  The toolkit is comprehensive as it builds on the work by the Money Advice Trust and StepChange Debt Charity and, in particular, it develops their well-known vulnerability protocols TEXAS, IDEA, CARES and BRUCE.

  • Operational resilience

A policy statement earlier this year required specified firms to identify their important business services, set impact tolerances for the maximum tolerable disruption and carry out mapping and testing of the tolerances.  Those firms also must identify any vulnerabilities in their operational resilience.  Firms must then show that they are able to remain within the set impact tolerances for each identified business service.  Firms must also have made the necessary investments to enable them to operate consistently within their impact tolerances.  Identifying important business services and setting impact tolerance for each is, frankly, critical for all businesses – specified or not.  While many firms coped quickly with recent operational upheavals, with the recent issues still clear in the mind, now is a good time to revisit resilience plans.

  • Financial resilience

I am sure most firms have had their financial resilience tested during the last 18 months.  I am sure the fallout from Covid-19 has led to new thinking in respect of what is needed in respect of what adequate resources need to be in place and how to assess how those needs may change in the future.  The role of adequate financial resources in minimising potential harm is an issue that is coming under closer scrutiny.

While these themes may have been highlighted in a very focused ‘Dear Board of Directors’ letter the themes are relevant to any regulated business and as we move into the last quarter of 2021 now is the perfect time to revisit them in order to make sure businesses are set up ready for the new challenges that 2022 will bring; whatever they might be!


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Partner - Baxters Business Consultants - a business consultancy undertaking marketing, training, freelance journalism and expert witness services to the residential mortgage lending, building society and financial service industry (April 1993 to date) - www.baxtersbc.co.uk.

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