Putting the customer at the centre of the business: is it a long road ahead for the FCA?

Speech by Christopher Woolard, Director of Strategy & Competition, FCA, delivered at the RiskMinds conference Conduct Forum in Brussels. This is the text of the speech as drafted, which may differ from the delivered version.

It is a pleasure to have this opportunity to talk about work we are doing to put customers at the centre of business.

At our creation in 2013, the Financial Conduct Authority was designed to be a bit different from its predecessor; to make markets work well, of course. 

But also to have a stronger focus on the consumer and a new duty to promote competition. 

We play a key role in the UK, along with our partners the Bank of England and Prudential Regulation Authority, in implementing domestic and European regulation.

Treating customers fairly (TCF) and achieving fair outcomes for consumers is central to our expectations that firms put the customer at the centre of their business model.

The various EU institutions and players have done, and continue to do, a significant amount of work in this area – for example: protection in various forms, from disclosure to conduct rules to product intervention: (MiFID 2, PRIIPS, IMD 2 are just some of the more recent high profile examples), alongside an ambitious growth strategy.

At the highest level we have also seen President Juncker’s agenda ultimately focusing on putting the consumer at the centre: most clearly, in his mission letter to Lord Hill in November last year, which tasked Lord Hill with: ‘ensuring that the financial services regulatory framework takes into account the needs and interests of consumers and retail investors and proposing any necessary measures to make financial services work better for citizens. 

'This mandate will be a key element of the current Capital Markets Union initiative, and we are also promised a further consultation from the Commission specifically on the retail financial services sector later in the year.’    

Will it be a long journey?

Almost certainly yes, but not without hope. I want to use the next few minutes to talk about three key components of the journey:

  • Culture in firms
  • Accountability and
  • Competition and Innovation

Culture in firms 

First, culture.

From a regulator’s perspective - it would be hard to underestimate the impact of Forex coming on the heels of LIBOR. Some of the evidence from those cases that has been published in the UK and internationally is truly shocking.

However, we are seeing change. Firms are starting to take a more proactive and forward -looking approach to risk. We have seen senior management and boards much more engaged with the conduct agenda. 

We are quite realistic about this. Setting the right culture is a long-haul process.  

It is not straightforward to govern the behaviour of individuals in large institutions, but it is critical that the culture is embedded throughout an organisation - and change in culture will only come when the tone at the top is consistent and completely aligned to the targeting of the business.

Firms have the key responsibility here for genuine, long term cultural change. There is no point talking about values that are not underpinned by product development and sales practices to match.

We want to see profitable, healthy, sustainable businesses, which will not be possible if business models and targets are still set at levels informed by the misconduct of the past.

It is also impossible to drive forward culture without individuals having sense of personal responsibility for actions.

Over the last 30 or so years, the system has sprung up where rewards are highly individualised, but responsibility is mutualised. 

So when we go into firms we see those who could be responsible seeking safety in numbers when it all goes wrong.


That brings me to my second point.

We are focusing over the next year on embedding the new accountability regime and changes to the remuneration code for banks.

They will make it easier for both firms and regulators to hold individuals to account for their conduct.  

We want those senior individuals to be held accountable for the decisions they make and oversee. This is what people inside and outside the banking sector expect.

There will be more clearly defined responsibilities within firms and the most senior individuals will face the prospect of up to ten years of bonuses being at risk if there is serious misconduct.

We want those senior individuals to be held accountable for the decisions they make and oversee. This is what people inside and outside the banking sector expect.

Whilst, and quite rightly so, the regime is focused on the most senior figures, middle management are a key engine to drive change. The new certification regime will help to address this by providing a clear set of expectations for those in a ‘significant harm function’, to which they can be held accountable to.

Finally, we are applying a set of basic standards to all employees of banks apart from support staff, to help foster a sense of professionalism and accountability in even junior staff.

In markets, earlier this month the FCA, along with the Bank of England and HM Treasury, published our final report and recommendations as part of the Fair and Effective Markets Review (FEMR).

The review, while identifying a number of root causes of past misconduct, has made in its report 21 recommendations which are designed to ensure that fixed income, currencies, and commodities (FICC) markets are fair and transparent for the future. Regulators and firms will need to work together to take these forward.


I want to shift tack slightly to my third point, competition. Whilst the FCA will not shy from tough regulations and enforcement, we also believe that properly functioning markets with empowered consumers can be one of the best safeguards for the future.

We believe the protection of consumers and market integrity are served by competition. 

The Independent Commission on Banking (ICB) shared this view stating 'competition will generally be the most effective way for the FCA to achieve its consumer protection objective, and will also be relevant to the pursuit of its market integrity objective.'

Our key competition aims are to encourage new entrants, increasing innovation in financial services, ensuring customers are put first; driving a situation in which consumers are served with a range of choice, with firms competing on service, quality and price.

Effective competition leads to lower prices, better quality, new products, generating benefits for both individual consumers and the economy at large.

So far the FCA has looked at subjects including the retirement market in the UK, cash savings and we have ongoing investigations into credit cards and the investment banking market.

In our work we have sought remedies that can empower consumers, using behavioural techniques to ensure information is targeted and helpful.

To limit the sale of products or techniques that exploit consumers.

We are also prepared to question whether some existing rules really serve to help consumers. 

For example, we recently submitted evidence to the UK Competition and Markets Authority showing annual disclosures of overdraft interest were ineffectual, but a combination of text message alerts and internet banking could cut overdraft costs by 24 per cent.

As part of our competition remit it is also critically important that we foster disruptive innovation in the interests of consumers.

We launched our “Project Innovate” initiative seven months ago as a means of making innovation easier. We have spoken to 200 firms and assisted 91 of them so far; some new, others more established but seeking to do something new, with the first few firms near to launch.

The rapidly evolving digital revolution that has changed the way the consumers interact with financial services is very much a focus for the FCA and last week we issued a Call for Input to understand the barriers to innovation in mobile and digital solutions.  

This week we publish further ideas about how firms can better communicate with their customers using the range of current communication channels, and responding to the ways in which many consumers now prefer to engage with all service providers. 

I think this increased attention to innovation and market efficiency, with customers at the centre, is also very much on the wider EU agenda – whether through the work of the European Supervisory Authorities, the Commission’s recent Digital Single Market strategy, or the focus highlighted by President Juncker that I quoted earlier.    


So, in summary, to the question is it a long road ahead? The answer is ’the road’ is busy and not without its hurdles.

As regulators we will also have to think smartly about how to empower consumers, make competition work well and foster innovation.

We will need to focus on culture and accountability. Every firm will need to play its part. We will need to use our traditional supervisory and enforcement tools.

As regulators we will also have to think smartly about how to empower consumers, make competition work well and foster innovation.

If we can there is a significant prize – of financial services that have regained consumer confidence and long-term sustainability of the financial services sector.

Thank you for listening and I look forward to your questions.