No Board Champion? No Problem – the FCA drops its guidance on a board champion for the Consumer Duty.

In a recent speech drawing on comparisons with Alexander the Great, FCA Chief Executive, Nikhil Rathi, detailed initiatives designed to untangle the intricate ‘Gordian knot’ of regulation smothering industry growth – while also maintaining consumer protection. 

One way of loosening that knot – downgrading the Consumer Duty board champion to optional. On the same day as Rathi’s speech, the FCA updated their guidance to state that it no longer expects firms to have a Consumer Duty champion.  Boards can now decide for themselves whether or not they think retaining a NED or another senior executive in the role is beneficial. The FCA cites “greater flexibility on their ongoing governance arrangements” as the driver for this change.

It's possible that this is more of a Trojan horse than a loosening of the Gordian knot. There are good arguments for saying that the flexibility the FCA is now claiming to deliver was there all along. The concept of a champion does not appear in PRIN 2A. It is an expectation set out in FG 22/5 - the FCA’s Non-Handbook Guidance on the Duty. If a firm could demonstrate suitable board challenge and engagement on the Duty, with adequate understanding of its obligations and progress on outcomes without a champion, it is difficult to see how they could have been viewed as non-compliant.

Regardless of which Greek myth is most analogous, firms must still make sure they get governance of the Duty right. A champion may be optional but good outcomes are not. All board and committee members need to actively challenge the way in which management asserts it is delivering on the Duty. 

That challenge needs to go beyond asking, “Have we considered the Consumer Duty?” Tailored and targeted questions need to be asked about how systems and processes are set up to produce good outcomes (and the answers recorded). Boards need to ensure that lessons are learned from any circumstances in which customers did not receive good outcomes. Actions to remediate should be completed in good time and tested to ensure they have fixed the problem, with senior leaders taking ownership of this process.

Firms will likely already have much of this in place. To the extent that they decide a champion is no longer necessary, firms should be prepared to demonstrate that they have considered the ongoing suitability of their governance structures in its absence – and adapted appropriately.