PRA has published a letter setting out the findings of its thematic review on collections. The letter follows PRA asking the internal audit function within non-systemic UK deposit takers to review their:
- collection processes and control environment;
- governance and oversight; and
- regulatory reporting.
PRA requested the review following findings in 2019 that fast growing firms had untested collections capabilities and lack of clarity on how they would scale up collections activity under stress. It also found some forbearance practices were not in line with industry standards.
42 banks and building societies took part in the exercise, representing just under half of non-systemic firms’ lending exposures. Half of the reviews were conducted by external audit firms, and most of them took place during the first lockdown.
PRA was generally pleased with the results, but recommended some improvements to some firms, concluding that around 20% of those surveyed need to strengthen their collections functions significantly, mainly in terms of process and board MI.