Banking and Finance

Issue 1223 / 21 September 2023

Council of the European Union

Consumer Credit Directive II - Council of the European Union publishes text of proposed Directive - 20 September 2023

The Council of the European Union has published the text of the proposed Directive which will revise and replace the Consumer Credit Directive (2008/48/EC) (CCD) (CCD II). This follows the European Parliament’s adoption of the text on 12 September 2023.

Proposed Directive of the European Parliament and of the Council on credit agreements for consumers and repealing Directive 2008/48/EC (2021/0171 (COD))

European Central Bank

Supervision of bank culture - ECB publishes speech - 20 September 2023

The European Central Bank (ECB) has published a speech given by Frank Elderson, Member of the Executive Board, and Vice-Chair of the Supervisory Board, of the ECB, on how culture drives risk in banks and what supervisors can do about it. Mr Elderson highlights the importance of supervising culture in banks, noting “it is often culture that whispers the first signs of trouble”. Key points made in the speech include the following:

  • Culture represents the “DNA” of how a bank and its employees operate and react to risk. As such, it is key for supervisors to observe a bank’s culture closely in order to proactively identify potential risks.

  • The ECB must identify similar warning signs to ensure that banks are safe and sound, and the financial system remains stable. It examines both the “hardware” of a bank’s governance and “software” of those behaving within it in order to truly understand how it is set up to deal with risk.

  • In assessing risk culture within banks, which Mr Elderson defines as the set of norms, attitudes and behaviours related to the awareness, management and control of risks in a bank. The ECB considers the tone from the top, due to its crucial role in establishing a culture of prudent risk-taking within an institution. In doing so, it evaluates whether board members include the bank’s declared set of values and norms in their decision-making, including through board member interviews.

  • In the ECB's recent review of management body effectiveness, its supervisory teams considered whether the necessary structural elements of management bodies were in place and the quality of debate and challenge within those structures. A key element it focused on was the culture of constructive challenge. An important way the ECB sees whether this is taking place is by observing board or committee meetings.

Mr Elderson also addresses those who believe the assessing the behaviour and culture of banks is outside the remit of banking supervisors. He states that this element is core to the role of supervisors and one on which they have been asked to supervise, both by international standard-setters and EU legislators. In doing so, supervisors do not directly steer a bank’s management, but rather assess the dynamic between a bank’s board and its management.

Treading softly yet boldly: how culture drives risk in banks and what supervisors can do about it

Financial Conduct Authority

Bank account access and closures - FCA publishes report and letter - 19 September 2023

The FCA has published a report of its initial review into bank account access and closures. This follows the FCA’s letter in August 2023 sent by Nikhil Rathi, FCA Chief Executive, to Jeremy Hunt, Chancellor, regarding increased public concern about payment accounts being closed without fair justification, such as on the basis of political views, and announcing the FCA data exercise that would form the basis of the report. The FCA has also published a Research Note on de-risking, which examines account closures from an international perspective.

The report considers data gathered from 34 banks, building societies and payment firms and finds that, between July 2022 and June 2023, no account closure was done primarily on the basis of the customer’s political views. Instead, the main reasons for an account’s closure, suspension or rejection across that period were inactivity and financial crime concerns.

The FCA notes that the data gathered is incomplete and, therefore, it cannot, as yet, draw full conclusions. However, it fully expects firms to take on board the report’s findings, particularly in determining whether their management information is sufficiently detailed to meet the expectations of the FCA’s new Consumer Duty. The FCA will be conducting further work in this area, including:

  • a follow-up report to provide assurance of the accuracy of the data reported, concentrating particularly on outlier firms;

  • additional supervisory work to confirm its conclusions on accounts closed for political reasons and closer analysis of accounts closed for reasons of reputational risk;

  • a review of declined applications for, and terminations of, basic bank accounts;

  • engagement with consumer groups and organisations to understand their experiences and the impact of account declines, terminations and suspensions where these are within the FCA’s regulatory remit; and

  • a financial inclusion sprint in Q1 2024 focused on improving consumer access to financial services.

Alongside the report, the FCA has published another letter sent by Mr Rathi to Mr Hunt, which outlines the report’s findings and makes several suggestions to HM Treasury. These suggestions include a parliamentary debate on whether there should be a statutory right for individuals, businesses and other groups to have a payment account.

FCA report: UK Payment Accounts: access and closures


FCA letter to the Chancellor

FCA Research Note: International perspectives on de-risking

Press release

Payment Systems Regulator

APP scams - PSR publishes Consultation Paper - 15 September 2023

The Payment Systems Regulator (PSR) has published a further Consultation Paper (CP23/8) on proposed changes to timelines and reporting periods to improve transparency regarding authorised push payment (APP) scam data. This follows the PSR’s Consultation Paper (CP23/5), published in August 2023, and Policy Statement (PS23/1), published in March 2023.

The paper sets out additional changes to those proposed in CP23/5 for the Cycle 2 data collection period in order to capture all relevant data in 2023. The main proposal introduces a 12-monthly reporting window for Cycle 2 data, rather than 6-monthly as specified in PS23/1. Under these proposals, the PSR is likely only to need to run one more cycle of data collection (to collect 2024 data), rather than another three under the current scheme.

The consultation period is open until 5.00 pm on 22 September 2023.

PSR Consultation Paper (CP23/8): APP scams: Measure 1: Cycle 2 - Additional changes to timelines and reporting periods


Advertising Standards Authority

Equity release mortgage advertising - ASA publishes ruling - 13 September 2023

The Advertising Standards Authority (ASA) has published a ruling (A23-1192981) against Key Retirement Solutions Ltd (KRS), a mortgage broker trading as Key Equity Release. The ruling relates to a televised advertisement run by KRS in January 2023 for one of its equity release mortgage products.

The ASA raised two issues when challenging the advertisement. First, that KRS had irresponsibly appealed to fear regarding potential high mortgage rates and, secondly, it had misleadingly implied that the product was comparable to a normal mortgage.

In the ruling, the ASA upheld the complaint in respect to both issues. The advertisement was seen in the wider context of the increasing cost of living and targeted at older customers in financial difficulties. The ASA judged that the language of the advertisement risked exploiting some viewers’ concerns about their finances and fear of increased future mortgage repayments. Furthermore, the ASA decided customers might infer from the voice-over in the advertisement that a mortgage could be straightforwardly substituted for the product at the end of an existing deal. Although the on-screen text provided some information about the risks associated with the product, the ASA deemed the text setting out the risks had less prominence than the voice-over which detailed the product’s benefits.

As a result of the ruling, the advertisement must not be broadcast again in the same format. The ASA also states that it has since cautioned KRS not to exploit the financial fears of vulnerable customers and to make clear the risks of its products in future promotions.

ASA Ruling on Key Retirement Solutions Ltd t/a Key Equity Release (A23-1192981)