TR15/4: Governance over mortgage lending strategies

This paper reports findings from our thematic review on governance over mortgage-lending strategies. The review assessed the quality of firms’ governance from a conduct perspective, when setting or amending lending strategies.

Why did we carry out this thematic review?

Since we became the FCA, we have seen executive management and Boards becoming more explicit in the way they engage with the concepts of conduct and customer focus. Through our thematic work, we wanted to understand how this translates into the development of new lending strategies at a time when many lenders are innovating and adapting in the face of market pressures and changes to regulation.

If firms are fully taking account of the potential customer outcomes as they develop, approve, implement and review their strategies, we can be reassured that they are considering conduct risks in a preventative and forward-looking way. However, where there are areas that could be improved, by publishing this report, we expect that firms can take on board these recommendations and make changes before risks crystallise into poor outcomes.

There are a wide range of governance structures and practices within firms when setting mortgage-lending strategies. We believe it is right that firms should tailor their approach in an appropriate way for their business. However, within the variety of approaches adopted by firms, our focus is to assess whether they are considering the risks to customer outcomes in their decision-making processes.

In particular, we want firms to recognise that effective governance means considering the customer throughout all stages of strategy formulation and delivery.

TR15/4 Governance over mortgage lending strategies [PDF]

Who should read this?

This paper will primarily be of interest to regulated mortgage lenders but, as the focus is on forward strategy, it could be of interest to all firms.

What are the next steps?

We encourage firms operating in the market to consider the key areas we have outlined in this report. Firms should satisfy themselves that they have appropriate controls in place to prevent customer harm and damage to the market. Firms should adopt an approach suitable to their business to produce good outcomes for customers.