Fix compliance or face enforcement, regulator warns boards of mutuals
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The Financial Services Authority has threatened the boards of building societies with enforcement action if they do not improve their compliance.
Speaking at the Building Societies Association’s conference last week in Birmingham, Sheila Nicoll, director of conduct policy at the FSA, told delegates that some boards are not taking compliance seriously.
She told delegates: “Recent discoveries that compliance reports have not been taken as seriously as they ought to be by boards serve as an early warning of the need for a credible second line of defence.”
She says boards need to be sure that what is happening on the ground is what they want and expect to be happening.
She says: “If you get this wrong there can be significant consequences and not just in terms of the hit to profits and capital caused by redress and FSA fines. Probably even more important is the great harm it can bring to your society’s reputation and that of the sector overall.”
The FSA has been carrying out compliance checks at mutuals and Nicoll says some societies have not paid enough attention to newer Banking Conduct of Business rules.
Richard Farr, director of Telos Solutions, says it is a board’s responsibility to make decisions on lending practices so they need to ensure the right information is communicated to them.
He says: “Over the last 18 months the FSA has been visiting mutuals and speaking to non-executive directors and testing how internal compliance has been communicated to the board.
“I have seen evidence of firms taking compliance seriously but it is ineffective because the right details are not relayed to the board.”
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