FIN. TeamFCA has provided an update on its work on product governance in small and medium sized retail banks. Its recent review looked at 2 year fixed rate savings products and how firms’ product governance frameworks help them to identify and manage the ongoing conduct risks of their products.
It specifically wanted to assess how firms respond to risks, whether created by the changing needs of customers or by external factors, whether their product governance frameworks sufficiently challenged their risk assumptions and how product reviews identified potential customer harm, and provide effective MI and use customer feedback.
FCA generally found firms had product-focussed committees and involved senior staff in decision making functions. They seemed clear on who was accountable for what. The governance framework covered all stages in the product lifecyle and firms had in place established and embedded product design processes, but not necessarily such good review processes. However, review processes did tend to capture customer feedback.
FCA found several areas of good practice – around customer outcome focus, valuing customer feedback and use of MI to monitor and identify risk. It also found a generally positive tone from the top and good customer service where firms contacted customers to inform them of newer, better products and to allow them to take advantage of the same promotional rates as were offered to new customers.
There were, though, areas for improvement, such as firms needing to ensure they acted on any lessons or risks that their reviews identified. FCA also found some firms should be clearer to customers when telling them when they can withdraw from products without penalty and recommended they test customer understanding more.
