Building Societies Must Be Committed to Members – Wheatley

May 11, 2012 /

Martin Wheatley, managing director of the Financial Services Authority (FSA) and CEO designate of the Financial Conduct Authority (FCA), stressed that building societies must continue to be committed to their members, and that the regulator would “treat everyone the same, big or small, bank or building society”.

Speaking at the Building Societies Association’s Annual Conference, and making his first speech to the building society sector, Martin opened by outlining how the regulatory changes would affect the sector. He also pointed out that the reform should be seen as an opportunity.

Wheatley recently delivered a speech to the Chartered Institute of Bankers in Scotland, where he said there are still unresolved issues around how customers are treated across financial services and getting to grips with them is central to rebuilding confidence and trust.

At the the Building Societies Association’s Annual Conference, he said: “Now is the time that we can really get to grips with what has been causing problems for consumers. There are still issues that we need to put right and the FCA’s focus on conduct issues will give us far more freedom to really deal with them once and for all.”

Martin noted that “life will be different….you are going to have to get used to two sets of people asking you questions”, but stressed that while the FCA and Prudential Regulation Authority will “cover the same things” they will “look at them from a different perspective”.

Martin also said that he recognised that epochal events of the last five years had changed the sector into one better equipped to deal with future prudential concerns, but perhaps not conduct ones.

“You have been through a lot together since 2007 and we are left with a sector that is leaner, but stronger. We now need to ensure we get a similar set of high standards on how customers are treated.”

He also promised that the FCA would learn from mistakes made by the FSA, noting that “we are moving on from a way of supervising that, frankly, spent a lot of time dealing with issues from the past, into one where more of our staff are looking at what may happen in the future.”

As well as looking to the future, Martin reminded the audience that every building society needed to fully engage with the banking conduct regulations in place today, such as crediting money into people’s accounts, or dealing with unauthorised transactions properly.

He said: “These regulations took effect in 2009…so it is not acceptable that some societies do not yet have the systems in place to do this.”

Recalling a building society that was fined for mis-selling investment products, where a lack of board engagement was key to the failings, Martin stressed that “now is the time that we can really get to grips with what has been causing problems for consumers over the years”. He added that the FCA will be expecting senior managers and boards to fully understand the risks posed to members, “especially if you are thinking of new areas to go into to grow your bottom line”.

And for firms not meeting these requirements, he warned: “The FCA would actively seek out potential issues and deal with them, rather than letting them snowball. It will look in depth at your business models, either individually or across the sector, to make sure that everything – from the way you develop products, to the way you treat your members and customers after a sale – is done with good outcomes for them in mind.”

Building societies, Martin said, need to ensure that they have the right skills reflected in their senior managers, particularly on their boards. He noted that the societies that have failed in recent years are the ones that failed to fully consider what they were getting involved with and did not put the interests of their customers at the heart of the decisions being made.

“There is nothing inherently wrong with societies looking at ways to increase their revenue…” he said. “But my message is to protect your members and customers first.

“We will expect all of you to give consumers a fair deal, and although we will recognise the difference in your complexity, and your business models, we will hold all of you to the same high standards.”


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