Working to Rules

October 2011


Dan Thomas

Dan Thomas
Regulatory Services



Replacing the FSA: a wake-up call to the financial services industry

Efficient and effective remediation: creating economies of scale across multiple lines of business

Keeping pace with changes to the FSA consumer complaints handling rules

Solvency II and the Compliance Function: It's not just about risk


Useful Information from our FS Risk and Regulatory Centre of Excellence


Click here to read our new bulletin on the ICB final recommendations

Click here to read "Systemic Risk and Resolution Plans for insurers: the need for a broader debate"

Click here to read "Recovery and Resolution Plans: the road to where?" on the August 2011 FSA proposals

Click here to read "CRD4: something old, something new"

Efficient and effective remediation: creating economies of scale across multiple lines of business

Pensions review, mortgage endowments, bank charges, PPI, AML – these challenges have cost the industry £billions in redress and operational costs over the last ten years, requiring onerous, resource-intensive remediation infrastructure to be built and subsequently decommissioned.  Many providers have faced quality and consistency concerns that have in turn invited regulatory scrutiny and increased reputational risk as a result.

An increasingly “intensive and intrusive” regulatory landscape plus growing media and political pressure make it almost inevitable that the remediation burden will continue to rise over the medium to longer term.  One only needs to look at the emerging Foreign Account Tax Compliance Act FATCA regulation from the US for more evidence of this growing trend.

Firms should consider it a business imperative to not only be better prepared, but, in this capital-constrained environment, to adopt an approach that maximises Return on Investment in remediation, thus diverting the fewest number of resources away from the front line business as usual. There are a number of areas which can help – for instance, root cause analysis (RCA) can constitute an early warning system to identify potential systemic failings. Learning points from RCA and past remediation activities can be used to shape firms’ future approaches to product design, manufacture, distribution and support.

In spite of this, firms generally fail to utilise this information to position themselves for the next big remediation challenge. Inadequate planning and preparation to facilitate systems, automation and off-shoring to deliver large-scale remediation activities all too often results in ‘business as usual’ operations suffering as resources and management time are diverted.

Firms typically end up with a combination of manual processes and non IT supported systems (Access, Excel) to support the remediation undertaking.  This “by necessity in the timeframe” approach carries with it significant operational and therefore regulatory risk.

Beyond horizon scanning

Some financial institutions invest substantial effort in horizon scanning and are well positioned to spot threats from a relatively long way out. Difficulties usually arise when mobilising resource to pre-empt or to otherwise deal with the identified threat. A particular challenge can be allocating skilled resource and the appropriate technology to setting up a completely new activity to run to the required scale in a short timeframe.

Having a predefined and well-articulated process in place would help firms to respond swiftly, effectively and efficiently to issues as they arise, whether or not they were foreseen and irrespective of the timeframe.  The time has come to build a repeatable remediation infrastructure that is “turn-key” and one that can handle a variety of issues, ranging from conduct/mis-selling risks, through to extra-territorial remediation such as FATCA or Sanctions to name a few.

A scalable, end-to-end remediation solution

To this end, KPMG has developed the Customer Remediation Centre (CRC) an end-to-end remediation platform, bringing together regulatory expertise, technology, on and offshored resource deployment, implementation and analytical capabilities. This is underpinned by a scalable and proven infrastructure that, as a hosted solution, can easily integrate into businesses' existing operations.

Offering consistent, rules-based quick case settlement or Straight Through Processing, it retains scope for faster and more consistent subjective decision-making where appropriate. This is enhanced and enabled by detailed up-front analysis and ongoing feedback into the processing platform and decision engines. The solution is configurable to individual client circumstances and is scalable to those needs at any given time.

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Crucially, the platform can be migrated in-house when convenient to do so. For instance, following the required remediation activity, the tool can be incorporated into the firm's systems to provide an ongoing platform for future remediation efforts, thereby better preparing them for both BAU complaint handling and future eventualities across a broad range of issues.

An Integrated and Rules-based model mitigates risk

The CRC embeds rules either explicitly stated or implied by the regulator on product notices. Regulators may draw comfort from the documented approach without necessarily needing to conduct further outcome testing. In addition, creating a rules-based system enables our clients to reduce the degree of subjectivity in the decision-making process, therefore improving efficiency and cost of resources deployed. In addition the integrated nature of the solution ensures that a complete audit trail, with appropriate reference to version controlled policy positions, is supported.

Contributing business value

Customer relationships can benefit through linking in to existing communication channels, permitting a swifter, more tailored and higher quality conversation with the customer to rectify a problem and to enhance the customer's experience. In deepening the relationship it can serve as a means of driving the potential sale of higher margin products while effectively demonstrating to third parties that they are not being mis-sold or over-sold.


In a capital and cost-constrained world, operating under ever increasing regulatory scrutiny, it is highly undesirable to build an expensive remediation infrastructure each time a problem occurs. Last-minute arrangements generally prove to be more expensive, more labour-intensive and more risky than an existing, enduring solution that can be scaled up and down to suit the firm's particular needs at any given time.

Contact Us

Dan Thomas
Partner, Regulatory Services
+44 (0) 20 7694 5575

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