Report: Santander UK to exit LSB following regulatory duplication concerns

Santander sign on a branch.
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Santander UK is reportedly cancelling its Lending Standards Board (LSB) membership because of the duplication of regulatory standards.

According to Sky News, the Spanish-owned bank recently signalled its intention to withdraw from the LSB. This decision comes amidst the establishment of the City watchdog’s Consumer Duty and the upcoming enforcement of new rules on fraud reimbursement overseen by the Payment Systems Regulator.

The LSB serves as the primary self-regulatory body for the banking and lending industry, which originated from the Banking Code Standards Board designed in 1992 by the British Bankers’ Association and other trade associations.

In its letter to the LSB, Santander UK said the new regulatory frameworks would “supersede the existing voluntary industry standards that are set out in the current LSB codes”.

The Bank wrote: “This inevitably leads to duplicative regulation and can create confusion among staff and customers about which standards apply.”

In addition, the bank noted that cancelling its membership would “mean more certainty and confidence over the regulatory landscape. Reducing duplicated effort, thereby enabling us to concentrate resources on other important customer and regulatory priorities”.

Santander UK’s letter to the LSB emphasised that its withdrawal “in no way implies any intention to reduce the standards of consumer protection we provide – indeed, quite the opposite”.

According to sources within the industry, several other prominent banks are reportedly contemplating following Santander UK’s lead in withdrawing from the LSB. 

Last November, the LSB highlighted the need to focus on APP fraud following data released by the Financial Conduct Authority (FCA), which revealed that over 116,000 people in the UK fell victim to APP fraud and scams in the first six months of 2023.

The board also looked to enhance operating standards for UK banking SMEs in February, stating that digital journeys and how SMEs apply for or access financial products online will be improved.

Anna Roughley, Head of Insight at LSB, said: “Registration with the Lending Standards Board enables financial services firms to send a clear signal that they are committed to achieving the right customer outcomes where there are heightened risks to customers or an absence of statutory regulation.

“We work closely with regulators and our registered firms to drive needed improvements in customer outcomes, and to ensure our Standards and Codes add value to the UK’s wider regulatory environment.”

Payment Expert reached out to Santander UK for comment.

A Santander UK spokesperson said: “Santander UK is committed to upholding high standards and delivering fair outcomes for our customers. Our announcement will not undermine the standards of consumer protection we provide.

“We have welcomed the role of the LSB in driving improvements in standards across the sector. However, we believe the standards set by the Consumer Duty supersede the LSB codes. Our decision was driven by the need to avoid duplication of regulation and to enable us to use our resources effectively and ensure good customer outcomes.”

In addition, the bank has stated it awaits further regulatory change relating to fraud, with the PSR’s new mandatory reimbursement requirements coming into force in October 2024.

A spokesperson said: “We remain committed to the CRM Code in the meantime.”