UK Financial Conduct Authority Publishes Portfolio Letters Setting Out Key Concerns and Priorities for 2025

The U.K. Financial Conduct Authority has published a series of portfolio letters it has sent to: (i) lifetime mortgage providers, which includes firms that provide lifetime mortgages, home reversion and later life lending products; (ii) non-bank mortgage lenders and mortgage third-party administrators; (iii) retail banks; and (iv) building societies, in each case setting out its key concerns and priorities in respect of each such portfolio in 2025.

The letters explain that the FCA plans to engage with relevant firms on their cultures and controls, focusing on the following consistent priority areas: (a) the Consumer Duty and for non-bank mortgage lenders, mortgage third-party administrators, retail banks and building societies, the treatment of customers in financial difficulty; (b) financial resilience (for non-dual regulated firms); (c) operational resilience; (d) financial crime and fraud; and (e) sustainable finance. For retail banks and building societies, the FCA identifies access as an additional priority; as firms transform their channels, products and services, it is vital that consumers are not unreasonably or unlawfully excluded from payment accounts and banking services.

In each instance the FCA concludes the letter by stressing that a cooperative relationship between regulated and regulator is crucial. The FCA reminds firms that it expects them to be open and honest with the FCA including telling the FCA about anything it would reasonably expect notice of under Principle 11, which applies to unregulated activities as well as regulated activities and takes into account the activities of other parts of a group. In particular, the FCA stresses the importance of being notified of any areas of the business that are significantly noncompliant with the Consumer Duty, any proposed restructuring, reorganization, business expansion or change which could have a significant impact on the firm's risk profile or resources and any proposed provision of a new type of product/service, or proposed cessation of a regulated or ancillary activity or significant reduction in the scope of such. The FCA would also find it helpful to be notified of new forward flow agreements entered into by non-bank mortgage lenders/mortgage third-party administrators. The FCA will continue to consider carefully whether those with relevant senior management functions have carried out their responsibilities appropriately under the senior manager and certification regime. Firms are expected to discuss the portfolio letter relevant to their portfolio with their board and should be prepared to show and explain to the FCA how they are taking reasonable steps to remediate any issues identified.

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