Wholesale Banking Supervision: FCA Findings Signal Culture, Conduct, and Control Gaps

The FCA’s recent publication on wholesale bank supervision (7 August 2025) doesn’t just present another compliance checklist. It’s a snapshot of where industry practices are diverging from regulatory expectations — and a reminder that governance failures often have less to do with the rules and more to do with how firms interpret and embed them.

At K2, we’ve unpacked the review into three themes that every wholesale bank — and indeed every regulated institution — should reflect on.

1. Culture vs. Controls: When Behaviour Outpaces Policy

The review shines a light on the limits of written policies. Take off-channel communications: many firms have invested heavily in approved devices, surveillance tools, and reminders. Yet 41% of breaches involved senior staff, often directors. The lesson? Compliance cannot be delegated to IT filters or HR reminders — it must be owned by leadership.

• Our view: Regulators are no longer satisfied with firms pointing to “prohibited” lists or automated surveillance. They want to see cultural accountability, with repeat breaches escalating into governance conversations, not HR footnotes.

  
  

2. Transparency Gaps Speak Louder Than Policy Statements

On gifts and entertainment (G&E), the FCA highlighted a striking misalignment: brokers logging hundreds of events that simply never appear in banks’ own registers. While some may be clerical oversight, persistent gaps suggest either unrealistic thresholds or a blind spot in enforcement.

• Our view: Where the numbers don’t add up, regulators infer weak governance. It’s not about banning corporate hospitality, but about demonstrating consistency between policy, practice, and oversight.

  
  

3. Client Assets Remain the Line in the Sand

Despite progress, CASS compliance remains under scrutiny. Failures linked to misuse of TTCAs, weak reconciliations, and poor change management continue to surface. These are not just technical errors — they strike at the FCA’s core mandate: safeguarding client money and assets.

• Our view: Firms too often treat CASS as a compliance “back room” exercise. The FCA’s review underscores that it is a front-line conduct obligation. Boards need MI that goes beyond “zero breaches reported” and provides confidence that reconciliations, interest allocations, and TTCA monitoring are working as designed.

  
  

4. Governance Matters More Than Optics

On insider lists, conflicts registers, and transaction governance, the FCA’s message is consistent: static or outdated frameworks aren’t acceptable. Whether it’s conflicts that haven’t been refreshed in years, or insider lists missing entire categories of staff, the regulator is signalling that frameworks must be living documents.

• Our view: A well-written policy without ongoing challenge is indistinguishable from a weak policy. Supervisors will test the alignment between stated controls and operational reality.

  
  

So What Should Firms Do Now?

The FCA isn’t introducing new rules — it’s clarifying how existing expectations are evolving. For wholesale banks, this means:

• Elevate CASS governance — treat reconciliations and TTCA oversight as board-level issues, not operational chores.

• Bridge the transparency gap — ensure G&E, conflicts, and insider registers are accurate, realistic, and consistently updated.

• Reinforce culture — off-channel compliance must start with senior leaders modelling correct behaviours.

• Challenge static frameworks — conduct horizon scans, scenario updates, and MI reviews that prove policies remain relevant.

  
  

Final Thought

The FCA’s findings show that the risks aren’t always where firms expect them to be. Often, the biggest vulnerabilities lie in mismatches: between what brokers record and banks log, between what senior staff do and what policies forbid, or between what governance papers state and what actually happens.

For firms, this is less about ticking regulatory boxes and more about bridging the gaps between intention and execution. Those who can demonstrate that alignment — through evidence, culture, and governance — will stay on the right side of regulatory scrutiny.

At K2, we help regulated firms turn supervisory feedback into actionable resilience. Whether it’s strengthening CASS controls, tightening transparency frameworks, or embedding conduct culture at senior levels, our team works with you to align practice with expectation.