FCA Recognises Industry Lending Standards For Business Customers

Small businesses need all the leverage they can get when it comes to dealing with UK banks, so it's worth noting that the Financial Conduct Authority has ‘recognised’ the Lending Standards Board Standards of Lending Practice for Business Customers for the purposes of the FCA's Senior Managers and Certification Regime.

The Standards apply to overdrafts, loans (excluding trade loans), commercial mortgages, credit cards and chargecard products.

FCA recognition is significant because the five conduct rules that Senior Managers of all FCA authorised firms have to abide by (in COCON 2.1) include the obligation to "observe proper standards of market conduct". The Standards should also help demonstrate that an individual satisfied the obligation to "pay due regard to the interests of customers and treat them fairly".

The FCA's individual conduct rules apply to all activities carried out by the individual in the course of their employment, even if the activities are regulated.  

Accordingly, the FCA has established a framework to formally recognise industry codes covering certain unregulated activities. 

Behaviour in line with an FCA recognised industry code will tend to indicate a person subject to the SMCR rules is meeting his or her obligation to observe ‘proper standards of market conduct’ in relation to unregulated activities. 

But industry codes are not mandatory and are not the only way of observing proper standards of market conduct, and "it may equally be possible to observe proper standards of market conduct in other ways." 

The FCA does not want industry codes to become prescriptive rules or have the same status as the FCA rules that govern regulated markets. They will be just one factor taken into account when the FCA makes decisions about the use of its enforcement powers.