The Financial Conduct Authority published findings from a multi-firm review of transaction governance in wholesale banks, focusing on how firms assess and mitigate transaction risks through their governance frameworks and committees. The FCA found no widespread weaknesses but observed that some banks’ processes were materially more robust than others, and it flagged a case where a firm provided inside information that was not identified or labelled as such, prompting a reminder of firms’ obligations to categorise and handle inside information. The review covered six wholesale banks and assessed the 50 most recent transactions submitted to each bank’s transaction governance committees, with a sample taken for end-to-end testing through interviews and documentation review. Risk appetite statements tended to be clearer for financial risks than for non-financial risks, with wide variation in how firms defined and monitored reputational risk and set escalation thresholds. Most firms could clearly describe their transaction governance structures, although one outlier could not. The FCA observed that most screening and many rejections occur pre-committee, but early-stage informal discussions were often poorly documented. At committee stage, chairs were typically second-line representatives or independent first-line personnel, though the FCA identified one instance where a decision was taken without a quorate committee; deal documentation also ranged from substantive analysis and challenge to tick-box checklists, including an example where risks were missed by the first line and only identified later by the second line. Some approvals were handled via email, and the quality and timeliness of minutes varied. Many transactions were approved with conditions and, unlike previous reviews, committees generally ensured conditions were implemented, including through workflow tools that improved tracking and prevented execution until key conditions were met. Management information was stronger at better firms, while weaker firms showed gaps in documenting and reporting aggregate reputational risk. For cross-border transactions booked into the UK, the FCA observed strengthened governance but highlighted the need for appropriate UK representation, clear ownership of risks, and effective integration of UK representatives into overseas processes.
Financial Conduct Authority 2025-12-03
Financial Conduct Authority finds uneven transaction governance practices across six wholesale banks and highlights inside information handling lapse
The Financial Conduct Authority (FCA) reviewed transaction governance in six wholesale banks, noting varied robustness in risk assessment and mitigation. While no widespread weaknesses were found, the FCA highlighted issues like inadequate documentation of early-stage discussions and inconsistent handling of inside information. The review emphasized the need for clear risk ownership and effective integration of UK representatives in cross-border transactions.