Tough love

In response to these allegations, during a recent grilling at the Treasury select committee, Lord Adair Turner, chairman at the FSA, claimed the regulator had been put under political pressure not to be "heavy and intrusive" with banking regulation, and instead to use a "light-touch" approach.

Lord Turner continued to make noises regarding a radical overhaul of the watchdog and a need for a more heavy handed approach and greater control over the regulation of financial products. He promised MPs a "revolution" in financial regulation with fundamental changes on their way. The extent of this revolution remains to be seen but there is intense pressure to radically alter the perception of the FSA and financial services in general.

However, the mortgage market has already seen a raft of fines and bans being levied by the FSA for numerous failings including a number of prosecutions on mortgage fraud as the regulator has begun to bare its teeth.

TCF initiative

One of the main components of the regime, the Treating Customers Fairly (TCF) initiative has been prominent on the FSA’s agenda for some time. In fact it has accelerated the full integration of the initiative into its main supervisory work. Through an announcement in the closing months of 2008 the original December deadline turned into the gateway for the FSA to assess that the delivery of TCF can be tested as part of a firm’s normal supervision visit.

On making this announcement, FSA managing director of retail markets, Jon Pain, stated: “This announcement means the FSA can deliver the benefits from the TCF programme more quickly. Our focus will be on the outcomes for consumers. We will continue to challenge firms rigorously where there are issues and take decisive action where necessary. The standard against which firms will be judged remains high, and the penalties for not complying remain tough.”

This sentiment confirms that there is no chance of this initiative drifting to the background of the FSA’s thinking and, if anything, its prominence at the forefront of regulatory procedures is even more apparent.

We are now three months on from the December deadline and whilst firms are fully aware of the implications and importance of TCF it is still debatable as to exactly how many firms can honestly say that they have successfully implemented TCF within their organisation. I imagine that whatever this number may be there is every chance that it would be significantly diminished if firms were asked to produce a demonstration of this implementation.


The question we often ask our clients to bring this point to the forefront of their minds is; ‘if the FSA were to walk into a staff lift and ask each individual what they thought was meant by TCF and the way in which their organisation embodied this, how many of those occupants could answer this satisfactorily? And, if the question was answered satisfactorily, how many of these employees could then walk over to their desk and demonstrate how they personally implemented that strategy into their day-to-day activities?’

The reality is that individuals need to be able to supply – or at least know where to go to obtain – the sufficient management information (MI) required to be able to demonstrate how this effectiveness is recorded. They also need to be aware of the benchmarks they are being judged against and, if there have been any changes made to their approach since the December deadline, the positive impact these have had on the customer experience.

Another question we often ask, is ‘What if the FSA asked to see the initial gap analysis conducted at the start of the TCF process?’. Firms need to be confident that they would be able to supply this information and be able to talk the regulator through the actions they have taken to address any gaps that may have been identified. They also need to be able to provide evidence of the management information obtained to support the successful implementation of these actions.

Complaints handling

As the issue of complaints handling will also be high on the agenda during the visit, firms need to ask themselves if they are able to demonstrate the changes implemented as a result of these complaints and, if so, whether or not they can also provide the necessary MI to prove this. Often forgotten in this exercise, but vitally important, are the clients who did not complain but were also affected by these issues - does the firm have evidence to support the fact that their situation was also rectified?

Customer feedback is also an important component. By now firms should be in the process of compiling up-to-date customer services questionnaires and also have the MI to back up the successful implementation of any changes made as a result of this feedback - all of which there is every likelihood the FSA will ask to see.

If firms can nod their head in agreement at the points highlighted then they should pat themselves on the back and be confident of passing any regulatory visit with flying colours. However, if firms are not confident of being fully covered on the points raised then, it is fair to say, that there may still be some way to go before they can state that TCF is firmly embedded within their organisation.

Research shows that the majority of people reading this article are more likely to be in the latter position rather than the former. Despite all the press and warnings, the industry is still struggling to take on board the full implications of TCF particularly now it is also having to cope with the changes likely to result from the RDR.


So, what should firms be doing to ensure they meet the regulator’s requirements?

The easiest solution is to revisit the steps the FSA originally recommended and realistically assess whether or not they have been implemented successfully within the organisation.

Take a step back and begin with the gap analysis that should have been conducted at the beginning of the process. Firms need to ask themselves if they have dealt with all of the issues highlighted and is there the appropriate MI to demonstrate this. If the answer is no, then firms need to identify the action needed to speedily resolve each issue and whom in their organisation is most suited to carry out this task and then, once completed, make sure they have the ability to demonstrate this.

As far as effective Management Information is concerned, firms need to look at the MI that has been collated so far and question whether it covers the key areas outlined by the FSA.

Beginning with the firm’s recruitment policy and then moving on to the effectiveness of the training and competence scheme, firms should ask themselves if the MI they have collated highlights individual performance against specific key performance indicator’s and the successful implementation of any remedial action taken as a result of this.

Again, if there is insufficient evidence to back up any of these points, investigate what action needs to be taken to obtain it and once completed make sure you have the relevant information to demonstrate this.

Firms also need to look at their post sales processes. Is there evidence that customers are being treated fairly across the board? What are the benchmarks each individual is working towards in this area, where are these listed and how often are they tested?


All of this may seem a little daunting but breaking all this remedial action down into small chunks will ensure it is done thoroughly and comprehensively and avoid leaving firms feeling overwhelmed. The most important thing is to start now - set a task list of exactly what needs to be done and prioritise this in order of importance.

For the majority of us TCF was, and always has been, an integral part of the way we conducted our business long before it became a regulatory requirement. The only difference now is that firms are being asked to demonstrate this in a factual manner.

Hopefully this article will point firms in the right direction and give them the comfort of knowing that, if help is required, then that help is easily available - but speed is of the essence, especially if the FSA continues on its ‘get tough’ crusade.