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FCA - Strengthening Accountability in Banking

Executive summary

As a general point we are concerned and alarmed by the divergent approaches that PRA and FCA have adopted in this consultation.  In relation to credit unions we have one regulator taking steps to apply the regime proportionately (though not going far enough) while the other fails entirely to recognise the burden that these proposals are likely to have on credit unions (in spite of its own cost-benefit analysis).  We would like to see both regulators extend their measures in support of proportionality and to devise a regime which is consistent between the two regulators.  At present the proposals are messy and do not take sufficient account of the burden that they will impose upon our members.

We strongly prefer the PRA’s approach to the implementation of the Senior Managers Regime and Certification Regime to that of FCA – we have however argued for this to be extended to all credit unions.  As such, we would like to query why the FCA has declined to utilise the flexibility it has available to it in applying the requirements more proportionately.  While PRA propose to make special arrangements for smaller credit unions, including a simplified framework for prescribed responsibilities and a specialised SMF category, the FCA intend to apply the proposals to credit unions in the same way as other firms.  This is despite concerns expressed by the independent cost-benefit analysis undertaken by Europe Economics which stated clearly that the cost-benefit case for these proposals in the credit union context is weak and that they are likely to cost credit unions and small institutions disproportionately.

We urge FCA to reconsider its proposals and do more to accommodate credit unions within the framework.  Most notably, we have significant concerns as to the potential for these proposals to present difficulties in recruiting, training and retaining senior staff and volunteers without compensation packages which many credit unions can ill afford. In particular we suggest that FCA: 

  • Consider the case for a simplified SMF framework for smaller credit unions and whether this can be extended to all credit unions.  
  • Within the current proposals, make it more explicit that the SMF structure should be applied in a way which fits the size and complexity of a firm and only require SMF approvals where they are materially-required.
  • Consider what guidance can be provided to credit unions as to how the new SMF structure ought to be applied in a credit union context.
  • Develop a set of simplified prescribed responsibilities for all credit unions, since the complexity and granularity of the proposed framework is excessive.
  • Develop guidance as to how the Statements of Responsibilities and Responsibilities Maps ought to be implemented in a credit union context.
  • Develop standardised formats for Statements of Responsibilities and Responsibilities Maps.
  • Remove requirements around handover meetings between successive SMF holders.
  • Provide further guidance and clarity as to the application of conditional approvals, particularly in relation to competition and proportionality.
  • Consider whether regulatory references should be limited to only SMF applicants, as criminal record checks are.
  • Provide guidance as to how regulatory references and criminal record check results should be used by credit unions in assessing candidates for approval.
  • Develop provisions for grandfathering which take account of the conceptual clash that occurs in relation to standing guidance at CREDS 8.3.4G and offer similar guidance material for how the SMF regime should apply in the credit union context.
  • Extend the transitional period for SMR, CR and Conduct Rules to 12 months. 

ABCUL is keen to work with FCA to develop the framework to enable its successful and proportionate application in the credit union context. 

The full response is available to download on the right hand side.