During challenging times, such as economic crises or periods of significant disruption, effective market conduct supervision becomes even more crucial. Financial consumers face particular challenges given the current macro-economic picture, including interest rate increases, set against the backdrop of a rapidly changing financial services industry (including through digitalisation). It is imperative to better understand the potentially negative and significant implications for consumer engagement with financial institutions and how this impacts the undertaking of market conduct supervision.
This briefing note is based on work carried out by FinCoNet including discussions from four FinCoNet workshops held between April and July 2024, survey responses and case studies provided by eleven jurisdictions, and a series of nine workshop presentations made by SC6 members. The full content of these materials (of which this briefing note is just a summary) is available to FinCoNet members.
This briefing note aims to:
- Explore how market conduct supervision is undertaken in the midst of challenging times, and in turn how this affects market conduct supervision.
- Collect market conduct supervisors’ approaches and initiatives.
- Identify particular risks for consumers, and the challenges faced by market conduct supervisors.
This briefing note explores the key themes as follows:
- The evolution of market conduct supervision: market conduct supervisors are moving towards a more preventive supervisory approach and more early identification of risks, by reinforcing supervisory expectations, continuous monitoring of individual firms, and thematic projects on specific subjects for groups of firms with high risk and impact. This is underscored by supervisors’ experiences navigating a series of crises in the last several years, including a global pandemic and increasing inflation and mortgage interest rates.
- The importance of supervisory data specific to conduct Risk and the relevance of SupTech: a key challenge for market conduct supervisors is a lack of real-time data, as well as challenges relating to the unstructured nature of data received. The increasing complexity of business models, products, and services offered by supervised firms means market conduct supervisors often need additional data, and better processes and technical infrastructure in place to improve the effectiveness measurement of market conduct supervision. Therefore, it is crucial to search for the tools developed with a view to helping conduct supervisors deal with administrative and repetitive tasks, which allow supervisors to devote more time and effort to complex tasks and supervisory analysis.
- Financial hardship: exploring the introduction of measures to reinforce the protection of vulnerable and at-risk mortgage debtors, and where appropriate embedding COVID-19 introduced financial hardship practices into business-as-usual activities.
- Frauds/scams: a discussion on control in the prevention of financial scams, improving policies and procedures regarding the handling of disputed payment transactions and customer complaints.
- Social media: monitoring the use of social media to communicate with consumers via public awareness campaigns (to maintain or improve confidence in the supervision of market conduct) and to gain real time insights into consumer experiences with financial products and services (via SupTech monitoring tools).
- Communication – Public and Industry: in challenging times for consumers, it is critically important for market conduct supervisors to proactively engage and discuss issues with industry, consumers and the wider public. Cooperation with external organisations and proactive public engagement was a reoccurring theme, with the intention of providing the wider public with confidence in market conduct supervisory work during challenging times.
- Opportunistic cost increases: examining increasing costs of current accounts and general insurance policies in some jurisdictions, at a time of increasing cost of living. This behaviour may reflect opportunistic behaviour towards consumers at a time when consumers can least afford it.
