TCF assessments embedding in the supervisory process

Transcription

1 TCF assessments embedding in the supervisory process 1

2 What does this paper cover? This paper describes the approach to TCF assessments for relationship managed firms from end-february. Small firms will continue to be assessed through the Enhanced Strategy for those firms. In particular, this paper explains how the approach will be embedded in the supervisory process - how does it differ to what happens now and how does it focus on outcomes? how is it risk based? how will we make it robust? how will we ensure that the assessment process endures? 2

3 Overview of TCF assessment process TCF assessment within the ARROW process The TCF assessment will take place within the firm s ARROW assessment. It consists of a high level view of the firm and a more detailed review of the TCF issues that are sometimes found in the sector the firm operates in Firm ABC High level assessment of the outcomes delivered by the firm including: TCF performance as shown by the management information oversight and use of management information that relates to TCF culture issue 1 issue 2 issue 3 Detailed assessment of the outcomes delivered by the firm including: TCF performance as shown by the management information customers experience of the firm (outcome testing) oversight and use of management information culture relating to TCF issues that are sometimes found in the sector that the firm operates in Assessment of outcomes We will use this assessment, in conjunction with whatever else we know about the firm, to form a view on the outcomes delivered by the firm to consumers. The firm will be given a single TCF score (low/medium low/medium high/high) and specific feedback in the ARROW letter to reflect our view of the outcomes it delivers. Actions arising from assessments will be detailed and taken forward in the firm s risk mitigation programme 3

4 Key points (1) How does this approach differ to what happens now and how does it focus on outcomes? The assessment approach requires the supervisor to consider the outcomes being delivered by the firm to consumers. The assessment will be undertaken through a review of what the firm s management information tells the supervisor about the outcomes - for instance by looking at whether the management information suggests that a product is reaching its target market. But we will also test customers experience of the firm e.g. by reviewing financial promotions, by reviewing the advice given to customers (by listening to phone calls between the firm and by reviewing customer files), by review of the clarity of correspondence sent to customers. There will be an increase in the time spent on assessing firms as a result of these changes In most cases, we will ask firms to complete a short pre-assessment questionnaire to help focus our assessment on how the firm is delivering outcomes. Any self audit or assessment will also be an input to our assessment Where our assessment identifies shortfalls, firms can expect us to take tough action using a range of regulatory tools How is it risk based? The detailed part of the assessment is carried out in the parts of the firm s business where poor outcomes are more likely to occur, given what we know about the sector the firm operates in Where the supervisor can place more reliance on the firm s culture to produce fair outcomes for consumers, and where the firm s management information is robust (it can be verified through our outcome testing), the time spent on the assessment can be reduced. But the focus on TCF outcomes as shown by the firm s management information, and the verification of that performance through outcome testing, will remain 4

5 Key points (2) How will we make the assessment process robust? The TCF part of the assessment will be subject to the same challenge process as the rest of the ARROW assessment i.e. the plan the supervisor puts forward to assess the firm and the conclusions of the assessment will be scrutinised by those independent of the assessment team, including the FSA s senior advisors. The feedback provided to firms on outcomes, and the actions that need to be taken, will also be subject to the same challenge process Specialists will be used to advise the supervisors on how to conduct the outcome testing and in some cases they will carry out the testing themselves Supervisors will receive specific training, and will be tested on, how to undertake TCF assessments within ARROW. There will be on-going testing of supervisors as part of the FSA s training and competence scheme. Those who take part in the challenge process will also be trained. How will we ensure that the approach endures? TCF assessments will become an integral part of the ARROW assessment process as described above 5