TCF Monitoring and Feedback
Ongoing FSA monitoring of TCF includes:
- day-to-day supervision of individual firms; eg looking to firms to demonstrate (for example using their own management information) how they are building TCF into all that they do
- assessment of small firms’ progress and TCF risk profile through a combination of mini-visits, face-to-face meetings at regional venues and telephone assessments – being rolled out over a three-year period and with follow-up visits where required
- findings from TCF and other thematic work – for example, across the board surveys by industry sector
- looking at results from the FSA’s periodic Financial Capability baseline survey (offers information on consumer financial literacy and behaviour)
- FSA consumer surveys (including mystery shopping exercises)
- relevant data provided by FOS or directly by firms in the form of Management Information (MI), complaints data etc
In July 2007 (following an earlier pilot scheme) the FSA introduced formal frameworks to enable supervisors to assess the risk a firm’s culture presents to the delivery of TCF. The approach (which varies by a firm’s size) involves looking at key ‘cultural drivers’ and key ‘management behaviours’ which can lead to fair or unfair outcomes for consumers.
Key ‘cultural drivers’ it will look at within larger organisations include:
- leadership (including internal communication)
- strategy
- decision making
- controls
- internal communication
- recruitment, training and competence
- reward
Key ‘management behaviours’ it will look at in smaller firms include:
- leadership (including internal communication)
- business decisions
- controls
- internal communication
- recruitment, training and competence
- rewards
For a ‘snapshot summary’ of what these drivers and behaviours mean in practice for firms view the FSA tables on our page TCF indicators.
To read about small firms’ assessments read our page Preparing for a TCF assessment
Ongoing feedback on TCF progress
TCF will continue to influence the ‘scoring’ of consumer products, business risk and controls as part of the ARROW assessments and relationship managed firms will find increasing emphasis on TCF in the risk mitigation plans which follow these assessments.
The FSA will also continue to communicate the findings of its work with smaller firms (following assessment of regulatory returns, thematic work etc) using web pages, the media, workshops, road shows and similar events.
Rewards for successful implementation of TCF
The FSA has indicated that it will:
- make regulation more arms-length where firms are seen to be doing well in implementing TCF
- be less likely to take enforcement action if the firm can evidence that it has made a genuine attempt to implement TCF into its business
TCF failings – putting things right
Where supervision work identifies TCF failings in a firm, the FSA says that its most likely response will be to:
- agree with the firm how it intends to address the shortfalls
- where failings have resulted in a loss to customers, require the firm to offer some sort of redress
Where thematic work identifies failings this may lead to the issue of a ‘Dear CEO’ letter.
Enforcement action
The FSA has indicated that enforcement action will be taken against individuals if it is felt that senior management has failed in its responsibilities. This might occur, for example, where a firm:
- denies TCF has any relevance for them
- fails to respond to indications that there are problems
- fails to take appropriate steps to work out what changes may be required and start implementing them
- has systems or takes actions that pose a risk of consumer detriment, or where actual detriment has occurred
The FSA also emphasises that it will take action on the basis of breach of Principle alone, whether or not there has also been a breach of other rules. It says that it expects to take more of this type of action in future – to cover areas of TCF not covered by the rules. Enforcement action could include varying a firm’s permission so that it cannot continue to conduct regulated business until it resolves the problem
You can read about enforcement action taken to date in our related section ‘Focus on fines’
FSA links
Key TCF documents on the FSA website (opens new window)
