Modernising Risk Assessment and Mortgage Markets

Unknown Speaker

Hi everyone, welcome back to the B-Compliant Podcast – I’m Vicky Pearce, as always joined by Rachel MacRae. Ready to dig in, Rach?

Rachel MacRae

Always, Vicky! And not just because it's, like, three degrees and raining in Manchester, and there’s literally nothing else to do… But seriously, today’s one’s meaty – the FCA have just published their findings on risk assessments. Multi-firm, multi-sector, loads to pick through.

Unknown Speaker

Yeah, this was a real mix – building societies, platforms, payments, wealth managers, you name it. The review zeroed in on business-wide and customer risk assessments, right? So, like, the BWRA and the CRA bits.

Rachel MacRae

Exactly! And I think it’s funny—well, not funny, but kind of classic FCA—they went straight for the tick-box mentality, didn’t they? Loads of firms had risk assessments, but the problem is most of ‘em were either totally static or just not tailored. It’s like creating the Mona Lisa, then shoving it in a cupboard… never to be seen again.

Unknown Speaker

That's such a good analogy, actually. And the FCA made a point – comprehensive, personalised, ongoing reviews are the gold standard. Just doing it once, or shoving the same old doc in the drawer, is a big no-no. There should be real evidence of review – minimum annual, but really, risks shift all the time, don’t they?

Rachel MacRae

Yeah, and—oh, this bit stuck out for me—they said some risk assessments didn’t even show how risks were measured. Like, there was no quant analysis at all, nothing to support why something was “low risk.” If you’re defending your analysis and there’s just a blank space, that’s not gonna cut it.

Unknown Speaker

I know! And then on the mitigation and management side, there was little linking up between assessing risk and what firms actually do about it. Some didn’t even consider scalability as they grew. You see it all the time, right, with firms focusing on onboarding clients, but not thinking how their existing controls cope if they double in size overnight.

Rachel MacRae

Absolutely, and you get that disconnect. The best firms—the review said so—they feed assessment into risk appetite, test their controls, adjust as they go. But the ones with poor practice, it’s all narrow focus, hardly any testing, and you end up with the same document from, like, 2019…

Unknown Speaker

And senior management buy-in, Rachel! You can’t overstate that. The FCA saw real difference where senior leaders challenged and actually got stuck in. If it’s just a compliance job, nothing changes. But if it’s driven from the top, you get those regular reviews, those scenario plans, and people feeling like risk really matters – not just box-ticking, like we keep saying.

Rachel MacRae

Honestly, I think we see this all the time, Vicky, don’t we? When we go into firms for health checks, or when we’re poking around for an acquisition, it’s either “here’s my risk assessment, hasn’t been touched in years” or “oh, what’s a risk assessment?” That last one’s… not ideal!

Unknown Speaker

No, it’s definitely not. And, like, as we said back in episode 8, resilience is all about putting this in the centre of the business, not treating compliance as this separate beast. It’s got to be a living, breathing part of your framework. I know we bang on about that, but the FCA’s now shouting it too.

Rachel MacRae

Yeah, so, if you’re sat there thinking “uh, mine’s probably due for a refresh,” have a look at the review—loads to take away there. And, of course, shout if you need a steer!

Unknown Speaker

So, moving on, the UK mortgage market… This one’s been everywhere lately! FCA Chief Nikhil Rathi’s speech at the Mortgage Club’s 30th anniversary really laid down the gauntlet, didn’t it?

Rachel MacRae

He did, and he didn’t pull any punches. Yes, the market’s healthy on paper—low arrears, loads of products, people getting decent advice—but it’s not working for everyone. That’s the bit that stands out.

Unknown Speaker

Yeah, there’s all these borrowers who just can’t get a foot on the ladder—irregular income, self-employed, recovering from life events… or even just lacking a chunky deposit. It’s a big problem, and the FCA’s basically saying if we don’t fix the system, we’ll soon have many more people stuck renting when they want to buy.

Rachel MacRae

It’s a huge point. They actually reckon renters may need an extra 400,000 pounds in pension savings compared to homeowners for a similar retirement. Staggering, really! So, reform’s needed. I thought it was interesting they highlighted the tweaks to affordability models—like, the March update, and now 85% of the market’s using these new approaches, meaning tens of thousands more can borrow up to £30,000 extra. But Vicky, what did you make of the “bold thinking” ideas?

Unknown Speaker

I loved it, in theory. Part interest-only loans, low-start mortgages for people whose incomes will grow, and even the “Citizen’s Advance” idea tied to the state pension. But yeah, those aren’t simple, and there’s risk involved. They did look at what’s going on in Canada, Australia, the US—other places are experimenting too, and some of it’s working. Though, like you said, needs careful design, or it’ll just create new headaches down the line.

Rachel MacRae

Completely. There’s definitely an appetite in the UK to try things because, as we’ve seen with Experian now using rental payments in credit scores and some lenders using bank data for the self-employed. In the US Upstart’s using, what, over 1,600 data points with machine learning to help more people qualify.

Unknown Speaker

Yeah, and the FCA’s not just sitting back—they’re running AI sandboxes and tech sprints to get more innovation through the door. I mean, it’s not just about getting people into homes, though. There’s the issue with mortgage advice being way too fragmented; if you want later-life lending you speak to one specialist, but for standard mortgages, it’s another, and then pensions advice is off somewhere else entirely.

Rachel MacRae

That’s something I’ve always thought was mad! It creates these “one and done” moments, where people make giant decisions but don’t actually know all their options. I like the sound of reforms to get more joined-up advice—the referral scheme, bringing housing wealth into Pension Wise, maybe even merging advice paths altogether. Such a big gap to close.

Unknown Speaker

Definitely. They’re also pushing for digital ID, streamlined AML, and just less faffing with paperwork—the fact that half a million transactions a year fall through, it’s mind-blowing, and it costs billions. So, really, the FCA’s saying, “let’s act now,” get everyone—lenders, techies, policymakers—to build a market that’s future-ready, more inclusive, and gives proper choice at all stages of life.

Rachel MacRae

I feel like we’ll be circling back to this as changes roll out—like with the Consumer Duty, it’s never just a one-off. The market’ll have to keep evolving, and so will the rules. Watch this space!

Unknown Speaker

Right, so, one of the big stories this week—and kind of crossing over into everything else—is the FCA’s partnership with Singapore to boost AI and innovation. What do you reckon, Rach?

Rachel MacRae

This is massive! Like, proper global stuff. The FCA and MAS—Monetary Authority of Singapore—are lining up joint projects around safe, responsible AI. They’ll be running stuff like joint sandbox testing and knowledge sharing, so both UK and Singapore firms can operate more easily in each other’s markets. Not just AI, but broader fintech as well.

Unknown Speaker

And it’s the first time the FCA’s having boots on the ground out there—they’ve got someone based at the High Commission now. That’s a big move, not just for tech, but for setting the tone on international collaboration. The point is, if you want to safely scale AI or any other cutting-edge tools, you can't do it in a vacuum. It’s about global best practice, and not reinventing the wheel every time.

Rachel MacRae

Yeah, and it’s not just for the big boys either. I think, thinking back to previous compliance episodes—like our chat around ESG and sector resilience—global partnerships really open doors for everyone, from startups to major institutions. When knowledge and regulatory ideas spill over borders, it only gets better for innovation and risk management. Plus, for the UK, it shows we’re serious about being a centre for fintech and AI investment after Brexit.

Unknown Speaker

That’s it. This kind of joined up, international approach—testing new AI tools together, sharing what works and what doesn’t—helps build trust, keeps customers safer, and hopefully means we won’t be reading about another “data fail” causing havoc in two years’ time. It’s exciting, actually, to see regulators take this proactive approach rather than just firefighting.

Rachel MacRae

Absolutely, Vicky! And, you know, I’m willing to bet we’ll see lessons from this UK-Singapore work trickle into how risk assessments are done, or how advice models might work in mortgage markets. These things do connect, even if sometimes it feels like compliance is all these little boxes… Actually, it’s all linked. Anyway, before I go off on a tangent about 18th-century trade routes—

Unknown Speaker

—No, please don’t! I reckon we’ll leave global trade history for another time. That’s all from us for this week—do check out the FCA reviews and keep an eye on these mortgage and tech changes. Rachel, as ever, thanks for the company.

Rachel MacRae

Thank you, Vicky—always a pleasure, rain or shine! And thanks to everyone listening—more to come next week. Stay compliant, and see you soon!