FCA Approvals, Liquidity Risks, and Policy Shifts

Vicky

Hello and welcome to the B-Compliant AI podcast. Okay, so this week we had an absolute highlight—I’m talking about a massive win for one of our clients. We helped them ace their FCA competency interview. Honestly, I think this just underscores how vital tailored prep is when you’re working closely with a regulator.

Rachel

Oh absolutely! It can be so daunting for some firms, but seeing them get through that with confidence is always worth the effort. I mean, those interviews can feel like you’re being grilled, right?

Vicky

Exactly. And you’ve gotta go in with the right mindset and evidence—it’s like, you’re not winging this, you know? Everything from understanding the expectations to practicing responses is key. That’s why we spent so much time planning things out for them.

Rachel

You can’t really underestimate preparation, can you? It’s, kinda like, if you’re going to cook something fancy, you need a proper recipe. Otherwise, you’re just throwing ingredients in and hoping for the best. Not gonna work with the FCA!

Vicky

Ha, I love that analogy! And then, alongside that success, there’s also the FCA’s new guidance on Senior Management Function applications. The FCA has created two new webpages that firms should check out.

Rachel

Yeah. They give examples like case studies showing exactly what kind of evidence you need to submit. I mean, that’s gold for compliance teams, especially if they’re dealing with tricky scenarios.

Vicky

Totally. These—well, these case studies? They really break down the dos and don’ts of the process. The FCA’s clear: a well-prepared application just makes the whole approval process much smoother. Frankly, reviewing those pages could save firms a lot of headaches.

Rachel

Right. And it’s important for firms to, like, get their ducks in a row because senior management approvals are no joke. It’s not just about ticking boxes—it’s about showing you've got capable leaders who actually understand their responsibilities.

Vicky

And for smaller institutions, this might be even more challenging as they often lack the resources that larger companies have, so having this guidance to rely on is a game-changer. But still, it takes effort and focus.

Rachel

Oh, effort for sure. And when firms make mistakes, it’s usually not because they’re bad at leading—it’s just they didn’t realise the depth of what the FCA’s looking for. Case studies like these help a ton.

Vicky

Absolutely. And the applications are complex, but guidance like this really clarifies what needs to be done. It’s about keeping everything professional but thorough, and those who can strike that balance will thrive.

Vicky

Speaking of FCA guidance, it looks like we’ve got another area firms need to watch closely. This week, the FCA reviewed liquidity risk management in wholesale firms, and it wasn’t exactly a glowing report. They identified some serious gaps, particularly around intraday liquidity risks and governance structures.

Rachel

Oh, that’s not surprising, is it? I mean, given everything that’s been thrown at firms recently—COVID, market instability, geopolitical tensions—it’s a wonder some of them haven’t drowned completely.

Vicky

Exactly. And the FCA’s findings really reflect that. Weak stress testing, shaky contingency plans, and governance issues—they’re all problems that could lead to a nightmare during periods of market stress. It’s a bit of a wake-up call.

Rachel

Yeah, and it feels like firms are, you know, almost waiting to see the cracks before fixing them, instead of being proactive. But the FCA’s laid out guidance here, right? Like, proper stress testing and having clear action triggers in your funding plans.

Vicky

That’s the thing, Rachel. They’ve made it clear: robust stress testing has to reflect real market scenarios, not just optimistic assumptions. And strong contingency funding plans need to be actionable, not theoretical. These aren’t optional anymore.

Rachel

Right! Plus, the governance angle is huge. Firms need to embed liquidity management into their culture, not just make it a box-ticking exercise for the board. It’s like... baking governance into the cake rather than sprinkling it on top as decoration.

Vicky

That’s such a great way to put it. Governance needs to be at the forefront, with leadership taking ownership of the risks and ensuring that every team, at every level, gets proper training.

Rachel

Oh, and speaking of training—we talked about this during our strategy day, remember? If firms improve training for management teams, they can kind of close that gap between governance policy and on-the-ground practice. It’s not rocket science, but it’s so often overlooked.

Vicky

Definitely. And I think that’s where firms sometimes trip up—they’ve got these policies in place, but implementing them across the board is a different matter. It’s got to be consistent.

Rachel

Yeah, consistency is key. And I reckon if firms follow the FCA’s recommendations properly—like improving data reporting and conducting regular workshops—they’ll be in a much better place to weather future market challenges.

Vicky

Couldn’t agree more. It’s about taking these findings seriously, not just brushing them off. Firms that adapt now will definitely have the edge moving forward.

Rachel

Speaking of accountability, Vicky, what are your thoughts on this shift away from the ‘name and shame’ policy? Or should we say... the lack of one now?

Vicky

Ah, yes! It’s reportedly being dropped. The FCA is rumoured to have decided not to move forward with those plans to publicly name firms under investigation. On one hand, this is good news for businesses concerned about fairness—but it does raise questions about transparency, doesn’t it?

Rachel

It really does. I mean, while no one wants their dirty laundry aired prematurely, wasn’t the whole point here to keep firms accountable?

Vicky

Exactly. The idea was to, you know, strengthen public trust in the FCA by being more open. But it seems the feedback was overwhelmingly critical—firms just didn’t feel the safeguards would strike the right balance between transparency and fairness.

Rachel

Yeah, and I get that. Nobody wants their name dragged through the mud unless there’s solid evidence. Still, it does make you wonder—did the FCA go too far with the proposal, or was the industry just too resistant to change?

Vicky

It’s a fair question. For now, though, they’re sticking to the "exceptional circumstances" rule, which means firms will only be named in rare situations. It feels like they’re trying to play it safe after the backlash.

Rachel

True. And speaking of big changes, let’s move on to what might be the even bigger news—the Payment Systems Regulator is being phased out!

Vicky

Yes, this one’s interesting. The government’s essentially streamlining things by merging the PSR’s responsibilities into the FCA. They say it’ll reduce the complexities firms face and create a more efficient regulatory environment.

Rachel

You know what? I honestly think businesses might welcome this. No more dealing with multiple regulators just to get, well... one problem sorted. It should save on costs and time, right?

Vicky

In theory, yes. But—and this is a big “but”—managing a smooth handover won’t be easy. There are so many moving parts, and competition and stability need to stay intact during the transition. The FCA will have to handle this carefully.

Rachel

For sure. And I guess the real test will be how businesses feel about it once the changes actually happen. If it leads to less red tape, then I think we’d actually call that a win.

Vicky

Definitely. So, listeners, if you’ve got thoughts or experiences to share about these updates, please do reach out—we’d love to hear how you’re handling things.

Rachel

Alright, I think that’s a good place to wrap up for today. It’s been great breaking these updates down and chatting through the impacts.

Vicky

Honestly, Rachel, I do love our little dives into compliance waters.

Rachel

Oh, me too! And who says compliance can’t be interesting, right?

Vicky

Exactly. So, a big thank you to everyone for tuning in. Don’t forget to follow us for more insights. If you’re curious about how we can help with compliance for your business, all the details are on our website; b-compliant.co.uk. Or, drop us a message on LinkedIn. We’re always happy to chat. Until next time, stay compliant and take care!

Rachel McRae

Bye for now!