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By Donia O'Loughlin | Published May 04, 2012

Wheatley: Shape business models around customer care

The financial services industry must get to grips with how customers are treated across financial services and will expect businesses to build their models around fair treatment of customers, the chief executive designate of the incoming Financial Conduct Authority has said.

In a speech to the Chartered Institute of Bankers in Scotland, Martin Wheatley, managing director of the FSA, said that many of the lessons of the crisis had been learned, “but that there was still much to be learned” to improve the way customers are treated across the financial services sector.

Mr Wheatley said: “The key point is that in the FCA, we will be looking to firms to construct business models where fair treatment of customers is central.

“We will expect those in executive management and on the boards of firms to step up their engagement with this side of the business and take this seriously.

“We have all – I think – learned the lessons on the prudential side of banking - banks are now far more financially secure and stable, with better risk management and preparation for what might lay ahead. We are not yet in that place on the conduct side.”

He said that the regulator is “working hard to get our regulation ready in time for the new regulators” and that, to this end, it is seeking to build an “understanding of what drives consumer behaviour and banks’ business models”.

Mr Wheatley emphasised that for the regulator “to work better than before” the FCA needs to understand why people make mistakes and why firms do what they do.

He said: “So we are looking at consumer behaviour and business models in firms to inform our new, more forward looking and intrusive supervision, and we will be expecting boards of firms to play their part too.”

The FCA will look at what is behind the economic decisions of individuals and the firms it regulates, Mr Wheatley said, adding that it will take into account the wider economy, the commercial challenges facing banks and the pressures on consumers facing tougher times.

He said: “Not only will we as a regulator need to understand your business better, boards will need to do the same, and they, like us will need to ask tougher questions.

“We have to ask why boards of banks did not ask the management of firms about how things like PPI could be so profitable – 15 per cent of some banks’ profits – and still deliver the fair treatment of customers.

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