In this section:

• Doing business with the FSA
  • Being regulated
    • Banking Conduct of Business Sourcebook
      • Training & supporting materials
      • Q & As

The Banking Conduct Regime commenced on 1 November 2009. It applies to the regulated activity of accepting deposits, and replaces the non-lending aspects of the Banking Code and Business Banking Code (industry-owned codes that were monitored by the Banking Code Standards Board).

The new Banking Conduct Regime commenced on 1 November 2009:

• the full application of the FSA’s Principles for Businesses;
• the conduct of business requirements of the Payment Services Regulations (PSRs):  new UK legislation on payment services that implements the Payment Services Directive, a piece of European Community law; and
• a new Banking Conduct of Business sourcebook (known as BCOBS), which contains rules and guidance.

This webpage focuses on the Principles for Businesses and BCOBS.

Further information on the Payment Services Regulations is available on our website.

The Principles for Businesses

In the past, we have said that in applying the Principles for Businesses with respect to accepting deposits and issuing electronic money we will proceed only in a prudential context.  That is to say, in this context, we would not expect to exercise our powers unless the contravention amounted to a serious or persistent violation which had implications for confidence in the financial system, or for the fitness and propriety of the firm or for the adequacy of the firm’s financial resources.

We have now deleted this guidance, and monitor and enforce compliance with the Principles in a conduct of business context, as well as a prudential context.

Further details on the Principles for Businesses, please see the relevant part of our Handbook.

The Banking Conduct of Business (BCOBS)

BCOBS is a new sourcebook that applies to firms with respect to the activity of accepting deposits from banking customers in the UK.

A banking customer is defined as:

• a consumer;
• a micro-enterprise; or
• a charity which has an annual income of less than £1 million

The rules in BCOBS on distance marketing, however, apply only to consumers.

BCOBS contains rules and guidance on:

• communications with banking customers and financial promotions;
• distance communications, including the requirements of the Distance Marketing Directive and E-commerce Directive;
• information to be communicated to banking customers, including appropriate information and statements of account;
• post sale requirements on prompt, efficient and fair service, moving accounts and lost and dormant accounts;
• unauthorised and incorrectly executed payments; and
• cancellation, including the right to cancel and the effects of cancellation.

BCOBS applies to accepting deposits to the extent that it does not overlap with the requirements of the PSRs relating to payment transactions and payment accounts.

This means that, broadly:

• where a retail banking service is not a payment service within the scope of the PSRs, BCOBS applies in full;
• where a retail banking service is a payment service within the scope of the PSRs, parts of BCOBS would not apply.

The Payment Services Regulations

The PSRs also came into effect on 1 November 2009. A range of information is available on our PSRs webpage, including:

• a link to the Regulations;
• a separate e-learning module;
• ‘The FSA’s role under the Payment Services Regulations – Our Approach’, which gives guidance on our approach to implementing the PSRs; and
• a list of frequently asked questions.

Recent amendments to BCOBS

Recent additions and amendments to BCOBS, transitional provisions and consequential Handbook amendments are outlined in Handbook Notice 92 (September 2009).

We have added guidance to BCOBS 4 to make it clear that ‘appropriate information’ for accounts that are not payment accounts includes:

• providing reasonable advance personal notification to banking customers of any material change to interest rates to their disadvantage;
• providing reasonable advance personal notification to banking customers of any introductory or bonus interest rates coming to an end, where appropriate; and
• where relevant, a reminder in such notification of the fact that other savings accounts are available and that the firm will, where applicable, help a customer to switch.

In determining whether a change in interest rates is material, this would be affected by the size of the balance and the size of the change in rate.  For introductory/bonus rates, the time period that has elapsed since the information was initially provided should also be taken into account. 

We have included a transitional provision on this guidance, allowing firms until 1 May 2010, provided they continue to meet their obligations under the general law and requirements in the Banking Code (for firms that are currently subscribers).

We have also added guidance to suggest that firms consider disclosing on statements any interest rate that applies.

Many of the other changes that we are making are to ensure that there are no gaps in consumer protection arising as a result of the more limited scope of the PSRs. We are therefore:

• adding provision to BCOBS on liability for losses in respect of unauthorised transactions outside the scope of the PSRs;
• adding a provision to BCOBS on incorrect execution or non-execution of payments outside the scope of the PSRs; and
• adding a requirement that funds received by a firm for a customer's account be value-dated on the day they are received for payments outside the scope of the PSRs (except for cheques), which takes affect from 1 February 2010.

The role of the OFT

Under the Consumer Credit Act 1974 (CCA) the OFT has the function to license, and the power to take enforcement action against, most businesses that offer goods or services on credit or which lend money to consumers. This includes overdrafts and the granting of credit in respect of credit cards.

The OFT and the FSA will work together to ensure that a consistent and co-ordinated approach is taken under the CCA, FSMA, the PSRs and the Handbook in relation to potential regulatory breaches and to agree which party is best placed to lead in each case.

All of this is set out in a Concordat which details the working relationship and division of responsibility between the OFT and the FSA.

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