JUST GROUP PLC Annual Report and Accounts 2021
GROUP RISK AND COMPLIANCE COMMITTEE REPORT CONTINUED
MATTERS CONSIDERED
HOW THE COMMITTEE ADDRESSED THE MATTER
EMERGING RISKS
At each regular meeting the Committee received updates on the climate change project, which was responsible for ensuring compliance with the recommendations of the Financial Conduct Authority (“FCA”) on the Task Force on Climate-related Financial Disclosures and the PRA’s requirements for the Group to manage its financial risks due to climate change. The high-level climate risk appetite was considered by the Committee and recommended to the Board who subsequently approved it. The Committee received an update on the findings of an external consultant’s assessment of physical and transitional risks to the Group’s Lifetime Mortgages property portfolio. All policies are being reviewed to ensure they reflect climate-related considerations, where appropriate. Following the issuance of a £250m Tier 2 subordinated bond by the Group in October 2020, the Committee received an in-depth review of the potential risks related to issuing further sustainable bonds with a particular focus on reputation and financial risks, and the steps taken to mitigate such risks. The Committee considered a major model change application for submission to the PRA for approval, which set out proposed significant changes to the internal model of JRL to ensure that it continued to appropriately reflect the underlying risks to the Group and to align it with the latest regulatory expectations and market practice. Prior to assessing the proposed changes, the Directors attended various briefing sessions which focused on the technical matters in connection with the proposed changes to the internal model and provided an opportunity for the Directors to challenge the proposed changes in advance of the application being finalised. The Committee recommended, and the Group Board subsequently approved, the major model change application and amendments to the scope of the application in response to feedback received from the PRA during its review. The application was approved by the PRA in December 2021. During the year, a matching adjustment application was submitted to the PRA on behalf of JRL primarily to reflect the appropriate treatment of the index no-negative equity guarantee (“NNEG”) hedging transactions in the matching adjustment portfolio and in the Effective Value Test, as required under the PRA’s Supervisory Statement SS3/17 Solvency II: Illiquid unrated assets. Prior to submission, the Committee reviewed the proposed changes and took into consideration the associated rationale, risks and uncertainties. The Committee recommended, and the JRL Board subsequently approved, the application, which has now been approved by the PRA.
CLIMATE CHANGE
GREEN BOND
SOLVENCY II
INTERNAL MODEL
MATCHING ADJUSTMENT
CONDUCT AND PRUDENTIAL COMPLIANCE AND REGULATORY RISK
The Committee regularly reviews and challenges management’s view of conduct risks across the Group. During the year, the Committee provided oversight on the programme of work to update the conduct risk framework and related policies to ensure that consumer outcomes are properly considered and to develop the Group’s approach to managing conduct risk in general. Changes included updates to reflect the FCA’s guidance on vulnerable customers and the conduct risk dashboard now includes various newmetrics including skills and capabilities of colleagues as a future focused measurement of conduct. Further work is being carried out on the conduct risk framework, management information and reporting. Oversight of the steps taken by management to address the recommendations arising from this review will be a key area of focus for the Committee in 2022. The Committee considered and approved changes to various Group policies and the 2022 compliance monitoring plan during the year. It received regular conduct and prudential compliance reports, an annual money laundering reporting officers’ report and an annual report from the Group Data Protection Officer. The Committee receives regular updates on key regulatory developments relevant to the Group and the associated actions being undertaken by management. During 2021, there continued to be a high level of regulatory activity as covered in more detail in principal risks and uncertainties on page 60. Letters from the FCA in October 2020 set out its views of the key risks lifetime mortgage providers and mortgage intermediaries pose to their consumers or the markets in which they operate together with the expectations including how firms should be mitigating these risks. In response, the Committee assessed the Group’s current position and concluded that there were appropriate systems and controls in place to mitigate the significant risks.
CONDUCT AND CUSTOMER RISK
COMPLIANCE OVERSIGHT AND POLICIES
REGULATORY RISK
On behalf of the Group Risk and Compliance Committee
KALPANA SHAH Chair, Group Risk and Compliance Committee 9 March 2022
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