Will Nominated Heads of Complaints be in the FCA's firing line? asks Charter UK.

Mon 1st April 2013

Whilst the Financial Services Authority (FSA) was heavily criticised for its 'light-touch' approach to regulation, Martin Wheatley, Head of the Financial Conduct Authority (FCA), is promising a much tougher, 'shoot first, ask questions later' approach. 

However Paul Clark, CEO of Charter UK, believes the increased powers of the FCA, along with the Prudential Regulatory Authority (PRA), which together replaced the FSA on April 1 as part of a new twin peaks model of financial regulation, could see a shift from just levying fines against firms. 

"The FCA and PRA are designed to have more power than the FSA did to halt immediately the selling and distribution of products that do not meet its standards," he explains. "Early intervention will mean potential risks will be challenged long before they have a chance to become detrimental to the customer, which is critical if the banks are to achieve their stated ambition of restoring consumer trust in the sector.

"To enable this early intervention, firms will be required to demonstrate a greater level of transparency than has previously been seen. Meeting the increased scrutiny will be challenging for some firms and it will be interesting to see how the FCA will deal with non-compliance."

Mr Clark points out that whilst the FSA was often criticised, in the Libor scandal and elsewhere, for not levying fines as heavily as its Wall Street counterparts, it seems that the FCA recognises that increasing fines will not change culture.

"As Martin Wheatley said himself, 'raising the level of fines is not going to make firms change unless individuals are held to account… and the consumers make a decision themselves that we'd rather bank elsewhere'," he says. 

"When the FSA introduced the requirement for firms to appoint a Nominated Head of Complaints to give visibility of complaints at board level there were calls for director responsibility and accountability. 

"Is Martin Wheatley suggesting that the FCA will use its new powers to take this further and we will see senior management being struck off, fined or even jailed for consistently failing customers?"

Mr Clark concludes that what we can expect to see is a 'no surprises' approach, a shift to more proactive and outcome focused supervision and a focus away from firms' systems and controls to consumer outcomes. 

"This is a real light bulb moment – and a departure from requiring banks to not only collect customer intelligence but to demonstrate how they are analysing this data and using effective root cause analysis to improve the customer experience," he says.