Best practices and risk assessment framework to guide firms

The Financial Services Authority (FSA) has issued its latest publications to support the delivery of the Treating Customers Fairly (TCF) initiative, which continues to be a key priority for the FSA's work in the retail market.

The first publication looks at firms' culture regarding treating customers fairly and highlights examples of good and poor practice seen in firm visits and the FSA's own TCF experiences.

It also introduces a framework – first outlined in the TCF progress report in May 2007 – which will be implemented within the ARROW risk assessment process. The framework enables supervisors to assess the risk firms' culture presents to the delivery of TCF in a more structured and in-depth way. This will include spending more time talking to middle management and front-line staff. The FSA has also developed a simpler management behaviour framework for smaller firms.

The second publication is designed to help firms develop and use management information (MI) to demonstrate that they are treating their customers fairly. This guide summarises messages from other FSA publications and includes new case studies and examples of good and poor practice. Further material will be issued to support firms in meeting the March 2008 deadline for TCF MI.

If the FSA is satisfied that a firm has robust systems and controls and the senior management are reviewing and using reliable management information which demonstrates that they are treating their customers fairly, it will significantly reduce the level of testing carried out on the firm’s culture regarding treating customers fairly.

Sarah Wilson, director responsible for the Treating Customers Fairly initiative, said:

"Treating Customers Fairly is an ongoing priority for the FSA. It is only through establishing the right culture that senior management can convert their good intentions into actual fair outcomes for consumers.

"Our culture framework is a useful tool for FSA supervisors to identify how firms' culture can impact on their customers. It will help us, and the senior management in firms, to understand some of the root causes of unfair outcomes and therefore reduce the risk that customers are treated unfairly.

"We strongly encourage firms to consider the issues we have identified and to think about how to use the framework to review their culture regarding treating customers fairly.

"We know that many firms find identifying, collecting and using management information for TCF challenging. We have issued material on MI and intend to continue to work with the industry to take this forward and to provide additional useful material ahead of the March 2008 deadline."