Compliance News - 6 May 2011
INDUSTRY NEWS FLASH WEEK ENDED 6 MAY 2011
The Financial Services Authority has welcomed the decision by the British Bankers' Association (BBA) and Nemo Personal Finance (Nemo) to accept the High Court's dismissal of their legal challenge to the FSA's payment protection insurance (PPI) measures.
In their Press Release, FSA stated “Banks must now get on with handling all PPI complaints and paying redress where appropriate - the FSA stands ready to work with them on the practical implications of this. Today signals the end of years of poor PPI complaint handling and will trigger a dramatic improvement in the way customers are treated when making complaints. There have been more than 1.5 million complaints made about PPI since the FSA took over regulation of PPI in 2005.”
Source: Financial Services Authority
The FSA has published guidance consultation on this topic and seeks comments by 14 June 2011. The document includes good and poor practice guidance to help firms comply with their responsibilities under the rules on Risk Control and Conflict of Interest.
This guidance is likely to be of most relevance to firms who are residential mortgage lenders or mortgage administrators, in particular members of management responsible for any aspect of forbearance activities and credit risk reporting, and also by finance, audit and compliance functions of firms. It is also relevant to financial reporting disclosure, and to external auditors of those firms who are active in providing forbearance facilities for customers.
This guidance is likely to be of most relevance to firms who are residential mortgage lenders or mortgage administrators, in particular members of management responsible for any aspect of forbearance activities and credit risk reporting, and also by finance, audit and compliance functions of firms. It is also relevant to financial reporting disclosure, and to external auditors of those firms who are active in providing forbearance facilities for customers.
The paper is focused on the prudential risk responsibilities of firms and thus on practices that impact on the loss risks of accounts (forbearance provided to support financial stress), the effective management of these risks and the mechanisms for their recognition and reporting.
FSA believe forbearance provided based on sound conduct principles provides for sound prudential management. The review is very much aligned with the provision of forbearance and support which acts in the best interest of customers undergoing financial stress.
The key issues raised are:
- the provision of forbearance support for customers undergoing financial stress;
- the recognition of impairment within the book through management committees and Board reporting; and
- the disclosure of impairment and its recognition through loss provisions in external reporting.
Source: Financial Services Authority
Sheila Nicoll, Director of Conduct Policy at the FSA, has made a speech to the Building Societies Association. The speech covered the following topics:
- Mortgage Market Review
- Conduct
- Regulatory reform
- Current supervision of building societies
- Retail Conduct Risk Outlook (RCRO)
- Europe
Source: Financial Services Authority
The Financial Services Authority (FSA) has welcomed the statement from the Treasury Select Committee Chairman Andrew Tyrie which confirms that in agreement with the FSA, the Treasury Select Committee (TSC) has asked Sir David Walker and Bill Knight to conduct an independent review of the report which the FSA is producing into the failure of Royal Bank of Scotland (RBS).
The FSA report will include analysis of the causes of RBS’ failure, a summary of the findings of the FSA investigation into matters relating to RBS’ decisions, risk controls and governance processes and an assessment of the FSA’s regulation and supervision of RBS identifying any deficiencies.
The independent reviewers will examine whether the FSA report fairly reflects the findings of the FSA’s investigation of RBS and the findings of its analysis of its own regulatory and supervisory activities. The terms of reference for this independent review will be published shortly.
The appointment of the independent reviewers follows discussions between the FSA and the TSC about how to ensure that the FSA’s report will be seen as a rigorous and transparent account of the different factors which contributed to RBS’ failure. Adair Turner, chairman of the FSA, said:
“There is strong public interest in having a clear account of the causes of RBS’ failure. The FSA is committed to producing such an account. Producing a high quality account takes time, both because the causes of RBS’ failure were complex and multi-faceted and because of the need to respect due legal process and confidentiality constraints.
“I am confident however that the final report will be seen as an open, fair, and valuable contribution to public understanding. The appointment of the independent reviewers will provide public assurance of the report’s openness and contribute to its quality. I am very grateful to them for agreeing to take this role and to the TSC and its Chairman Andrew Tyrie for their constructive role in seeking to ensure an effective and valuable report.”
Source: Financial Services Authority
"The BBA on behalf of its members judicially reviewed the FSA and the FOS regarding the retrospective elements in the proposed FSA rules for handling PPI complaints. The judgement was handed down on 20 April 2011 and found in favour of FSA and the FOS. The BBA was given until 10 May 2011 to seek permission to appeal.
"In the interest of providing certainty for their customers, the banks and the BBA have decided that they do not intend to appeal. We continue to believe that there are matters of important principle which we will be taking forward in other ways with the authorities."
Source: British Bankers Association
Following the High Court judgment – endorsing the ombudsman's and the FSA's approach on the way payment protection insurance (PPI) complaints are handled – the British Bankers Association (BBA) confirmed on 9 May 2011 that it will not be appealing against the ruling.
Responding to this news, Natalie Ceeney, chief ombudsman, said:
“It's very good news that the banks will not be appealing the High Court's clear-cut judgment, which endorsed the ombudsman's and the FSA's approach to PPI complaints. We are pleased that banks will now be dealing with their customers' complaints. Consumers should come to us at the ombudsman if they're unsure about what to do next. Meanwhile we will be working with the banks, over the coming weeks, to ensure that consumers' complaints are dealt with fairly and promptly.”
The ombudsman service continues to handle large volumes of PPI complaints from consumers. Since the BBA launched its legal challenge in October 2010 on behalf of a number of high-street banks, the ombudsman has been receiving up to 5,000 PPI complaints each week.
This means that the ombudsman service has received over 200,000 complaints in total about mis-sold PPI policies – upholding 3 out of 4 cases in favour of consumers.
Source: Financial Ombudsman Service
