Understanding the FCA thematic review (part1)

The Financial Conduct Authority carries out regular ‘thematic reviews’ into areas requiring further review by firms in the financial services industry.

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Why does the FCA instigate a thematic review?

For the FCA, thematic reviews are a central element of its activity. Thematic reviews are used to ‘assess a current or emerging risk relating to an issue or product across a number of firms within a sector or market’. As an example in 2019, it conducted a thematic review of the debt management sector.

The objective of a thematic review?

The review will usually aim both to discover what is happening in the market and identify any current issues, and identify potential solutions to address these issues.

The FCA’s thematic reviews are sometimes also referred to as ‘issues and products’ work or ‘cross-firm work. The thematic review process can be applied to a wide range of situations, firms, or groups of consumers.

A thematic review aims to allow the regulator to investigate key risks that have been flagged or it has spotted. If specific risks are identified, further detailed work is carried out into a particular area of concern.

Regulatory Toolbox

Thematic reviews are one of the tools in the FCA’s regulatory ‘toolbox’, along with its risk management approach, operational framework, mystery shopping activities, and Skilled Persons’ Reviews.

The FCA may also seek attestations from senior management in firms with specific issues, and put in place enhanced supervision for firms where they have particular concerns.

Tune in for part 2 for what a review may consist of, how to remain ready and cognisant of a review, and preparation for an FCA visit.