REG - Vanquis Banking Grp - Annual Report and Accounts and AGM Notice
04/04/2024 12:30
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240404:nRSD3627Ja&default-theme=true
RNS Number : 3627J Vanquis Banking Group PLC 04 April 2024
4 April 2024
Vanquis Banking Group plc ('Company')
Publication of 2023 Annual Report and Financial Statements and Notice of 2024
Annual General Meeting
The Company has today published the following documents:
- 2023 Annual Report and Financial Statements; and
- Notice of 2024 Annual General Meeting ('AGM').
In compliance with LR 9.6.1R, the 2023 Annual Report and Financial Statements
and Notice of 2024 AGM have been submitted to the Financial Conduct Authority
via the National Storage Mechanism and will shortly be available to the public
for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . These documents
will also be available on the Group's website from today
at: www.vanquisbankinggroup.com/shareholder-hub
(http://www.vanquisbankinggroup.com/shareholder-hub) .
Annual General Meeting
The AGM will be held at 3.30pm on 15 May 2024 at the offices of Clifford
Chance LLP, 10 Upper Bank Street, Canary Wharf, London E14 5JJ.
Additional information
A condensed set of the Company's financial statements and information on
important events that have occurred during the financial year and their impact
on the financial statements were included in the Company's results statement
(RNS announcement dated 27 March 2024 ("Preliminary results for the year ended
31 December 2023")). That information, together with the information set out
below constitutes the material required by DTR 6.3.5R. This announcement is
not a substitute for reading the 2023 Annual Report and Financial Statements
in its entirety. Page, note and section references below refer to the
corresponding pages and/or notes/section in the 2023 Annual Report and
Financial Statements.
Contact: David Whincup, (0)1274 351 344
Appendix
Principal risks
A description of the principal risks and uncertainties that the Company faces
is extracted from pages 46 to 50 of the 2023 Annual Report and Financial
Statements.
Principal risks are risks which are most significant to Vanquis Banking
Group's strategy and business model and have formally been articulated as part
of its risk appetite framework. Principal risk categories and associated risk
appetite statements are reviewed and approved by the Board on an annual basis,
effectively defining the Group's overall risk appetite and recognising changes
to our risk profile.
The principal risks have been updated for 2024, recognising the evolution of
the breadth and types of risks that the Group is exposed to and reflective of
the environment we currently operate in. Our principal risks and how we manage
them are set out below. In summary, our principal risks have remained largely
stable year on year, albeit with volatility during H2 2023 following the
half-year results and actions taken in response.
Risk Pillar 1: Customer and conduct
We deliver fair customer outcomes and meet the expectations of our regulators.
Principal risk
P1. Customer Key considerations
The risk of poor customer outcomes due to poor design, distribution and Our target customer cohorts require robust practices to support responsible
execution of products and services or poor governance and processes. lending for borrowers under financial pressure and provide appropriate
solutions to meet our customers' needs. We continually seek improvement to our
product governance processes and customer outcome monitoring activity across
the First and Second Lines of Defence, and proactively provide compliance
advice and guidance on key matters.
We continue to see a high volume of complaints driven by Claims Management
Companies (CMCs), with one such CMC accounting for 80% of the volume. CMCs are
regulated by the Solicitors Regulation Authority and therefore do not follow
FCA guidelines. Due to this, we are witnessing poor practices, such as lack of
customer due diligence on their part, and the level of upheld complaints has
been consistently low for both the Group and the Financial Ombudsman Service
(FOS).
Mitigating actions
- Customer, Culture and Ethics Committee oversaw the development,
embedding and monitoring of the Group's customer objectives.
- The Group successfully delivered the requirements to meet the
FCA's Consumer Duty regulations in July 2023.
- Board-approved conduct risk framework and supporting metrics are
embedded across the Group to ensure delivery of good customer outcomes across
all high-risk interactions, such as lending, forbearance, vulnerability and
complaints.
- A rigorous customer outcomes assurance activity programme is in place.
- A complaints methodology and forum have been established to identify
and learn from complaints trends and FOS referral outcomes.
- In November 2023, the FCA confirmed receipt of our update on queries
relating to Borrowers in Financial Difficulty (BiFD) action and acknowledged
our ongoing progress to deliver the BiFD action plan.
P2. Regulatory Key considerations
The risk that our systems and controls do not support effective regulatory As a dual regulated firm, we need to adapt to the regulatory environment as it
compliance and we fail to meet the expectations of our regulators. continues to develop to ensure our lending is sustainable, suitable and
affordable. The PRA/FCA published 'The Regulatory Initiatives Grid' in
November 2023 and it highlights a number of key initiatives that are being
proposed for 2024/25. The current initiatives do not pose a risk at this stage
to the Group.
The FCA announced in January 2024 that it intends to review how motor finance
firms have implemented a ban, originally introduced back in 2021, on
discretionary (variable) commission levels. The announcement does not impact
the Group directly as we do not pay discretionary commission currently or
historically, only fixed, on our vehicle finance products.
Mitigating actions
- SMCR responsibilities are aligned to the RMF and Group Delegated
Authorities Manual (GDAM) providing a complete and clear view of
accountability, risk and control ownership and clarity around delegations and
mandates for approval. Senior management functions are required to attest to
their understanding and agreement of these.
- Conduct and regulatory policies and procedures are in place to
ensure the Group has appropriate controls and processes to deliver fair
customer outcomes.
- A compliance monitoring plan is in place, supported by a robust
methodology, to independently assess the adequacy and effectiveness of the
control frameworks in place to drive fair customer outcomes and regulatory
compliance.
- Strong and proactive regulatory relationships with regular lines of
communication are in place with both the FCA and PRA, who have been kept
abreast of our strategic initiatives, key risk management activities and
responses to regulatory developments e.g. Consumer Duty implementation and
BiFD action plan.
- Following the PRA's Periodic Summary Meeting in March 2023, we have
successfully completed all actions due for delivery in 2023, with a small
number to deliver in Q1 2024.
P3. Financial crime Key considerations
The risk that the Group's products and services are used to facilitate Financial crime includes anti-money laundering (AML), counter terrorist
financial crime against the Group, customers or third parties. financing (CTF), financial sanctions, external and internal fraud and
anti-bribery and corruption (ABC).
On average, we monitor 11 million transactions and 1.75 million customers each
month for signs of financial crime. The banking industry continues to suffer
from organised crime groups socially coercing individuals into providing
security information, exposing them to fraud. In addition, the Group's fraud
exposure has increased as a result of the Group's changing risk profile due to
an increase in brand prominence, the launch of digital wallets and higher
average credit limits/loan values offered to customers. Further technology
developments are ongoing in support of our detection and prevention
objectives.
Mitigating actions
- Financial crime oversight has been consolidated across all products,
implementing consistent risk oversight supported by Group-wide AML, CTF,
sanctions, fraud and bribery policies, overseen by a Group Money Laundering
Reporting Officer (MLRO).
- The Financial Crime Risk Forum provides oversight and challenge on the
Group's financial crime risk systems and controls. The Group MLRO provides
twice-annual updates to the Risk Committee.
- Industry-standard prevention and detection systems are in place covering
fraudulent transactions, suspicious activity, customer screening and
application fraud. These are regularly reviewed and refined to ensure
effectiveness.
- A Group-wide Fraud Strategy and Analytics team is in place within
the First Line of Defence, which focuses on fraud prevention, consistent and
fair customer outcomes and loss mitigation.
- A detailed business-wide financial crime risk assessment is in
place to measure financial crime risk consistently and effectively. This is
now being extended to cover the vehicle finance product.
- Oversight of our outsourced operations administering our savings products
has been enhanced and the articulation of the financial crime controls. All
new products are subject to a financial crime risk assessment.
Risk Pillar 2: Financial
We manage our credit risk exposures, supported by financial strength and
liquidity in normal and stressed conditions.
Principal risk
P4. Capital Key considerations
The risk that the Group fails to maintain the minimum regulatory capital The Group and Bank maintain sufficient capital resources, both in terms of
requirements, management buffer on a consolidated basis to cover risk amount and quality, to support the business strategy and provide a buffer for
exposures and withstand a severe stress. stress events. Throughout the year, the Group and Bank have maintained capital
ratios in excess of regulatory requirements (see capital risk management
section on page 140 for the Group's capital position). In assessing the
adequacy of capital resources, the Group and Bank consider the material risk
to which they are exposed and the appropriate strategies required to manage
those risks.
The 'Strong and Simple' regulatory initiative will be monitored for any
impacts on the Group's and Bank's management of capital risk. The PRA is
expected to begin consultation on capital requirements for simpler regime
firms in Q2 2024. The implementation of Basel 3.1 is expected to have limited
impact on the capital position.
Mitigating actions
- The capital framework is reviewed by the Board as part of the
annual Internal Capital Adequacy Assessment Process (ICAAP).
- Capital risk appetite metrics are monitored by the Board, Risk Committee
and Assets and Liabilities Committee (ALCO).
- Capital is held to meet Pillar 1 requirements, the most significant
elements for the Group and Bank being credit and operational risks.
- In addition, the PRA requires firms to hold capital to meet Pillar 2A
requirements, as assessed in the ICAAP. This confirms the amount of capital
required to be held to meet risk partially covered by Pillar 1 and risk not
covered by Pillar 1. The combination of Pillar 1 and Pillar 2A requirements
forms the TCR.
- To protect against consuming its TCR, firms are also subject to
regulatory capital buffers and the PRA may set an additional firm-specific PRA
buffer, forming the OCR.
- In March 2023, the Group announced a reduction to its TCR from the
PRA to 11.9% (previously 18.3%). The OCR reduced from 21.8% to 15.4%, which
included the regulatory combined buffer prevailing at the time of 3.5% but
excluded confidential buffers set by the PRA and additional internal
management buffers.
- The Group's Pillar 3 disclosures for the year ended 31 December
2023 are published separately on the Group's website. Pillar 3 complements
Basel's Pillar 1 and 2 framework and seeks to encourage market discipline by
developing a set of disclosure requirements, which would allow market
participants to assess key pieces of information on a firm's capital, risk
exposures, risk management processes, leverage and remuneration.
P5. Funding and liquidity Key considerations
The risk that the Group has insufficient financial resources to meet its The Group and the Bank maintain sufficient liquid assets both in terms of
obligations (cash or collateral requirements) as they fall due, resulting in amount and quality, to meet daily cash flow needs and stressed scenarios
the failure to meet regulatory liquidity requirements, or is only able to driven by the Group's own risk assessment and regulatory requirements.
secure such resources at excessive cost. Throughout the year, the Group and Bank have maintained funding and liquidity
ratios in excess of regulatory requirements. Liquid assets solely comprise of
reserves held with the Bank of England (see liquidity risk management section
on pages 136 to 138). The 'Strong and Simple' regulatory initiative will be
monitored for any impacts on the Group's and Bank's management of funding and
liquidity risk. Changes announced to date have limited impact on the
management of this risk, which are due to go live throughout H1 2024.
Mitigating actions
- The funding and liquidity framework is reviewed by the Board as
part of the annual Internal Liquidity Adequacy Assessment Process (ILAAP).
ALCO is responsible for managing the balance sheet structure, including the
funding plan and its risks.
- To ensure that there is no significant risk that liabilities
cannot be met as they fall due, business cash flows are managed and stress
tested. The Group and Bank maintain liquid asset buffers of at least 100% of
the anticipated outflows seen under internal stress test scenarios (90-day
stress) and the regulatory prescribed liquidity coverage ratio (30-day
stress).
- Funding and liquidity metrics are monitored through daily liquidity
reporting, reported monthly at ALCO meetings and quarterly to the Risk
Committee and Board.
- Throughout the year, the Group has moved to a more retail deposit
source of funds, having successfully repaid maturing wholesale funding
sources. Additionally, the Bank has demonstrated that it continues to have
access to the retail deposit market through fixed-rate deposits. The Group has
worked closely with our third-party provider, Newcastle Strategic Solutions
Limited, to make operational improvements and has broadened the range of
retail products it offers to include 30-day and 90-day notice accounts. The
Bank will continue to ensure it has sufficient and diverse access to retail
deposit markets.
P6. Market Key considerations
The risk that the net value of or net income arising from assets and The Group and the Bank do not take significant unmatched positions and do not
liabilities are impacted as a result of changes in market prices or rates, operate trading books. Some financial assets and liabilities are linked to an
specifically interest rates, currency rates or equity prices. underlying index, such as Sterling Overnight Index Average (SONIA) or Bank of
England base rate. The principal market risks the Group and Bank are exposed
to are interest rate risk and basis risk (see market risk management section
on pages 138 and 139).
Mitigating actions
- The Group and the Bank use interest rate sensitivity gap analysis to
inform them of any significant unmatched positions.
- The increased quality of interest rate risk in the banking book
(IRRBB) management and the capability to transact external and internal
interest rate swaps have significantly enhanced the monitoring and management
of market risk.
- The market risk position is reported monthly to ALCO and includes
risk appetite metrics set for earnings at risk, market value sensitivity,
economic value of equity and basis risk. This includes the risk under
different interest rate risk scenarios as prescribed by regulation.
- The Group and the Bank have limited appetite for market risk,
which is only taken if essential to core business activities.
P7. Credit Key considerations
The risk of unexpected credit losses due to customers failing to meet their The Group is exposed to credit risk at all stages in the customer lifecycle,
contractual obligations. which can fluctuate from the point of application and various stages through
the agreement. Credit risk is impacted by a number of factors outside of the
Group's control, including wider economic conditions.
The Group's credit quality has progressively and materially improved over the
year, partly due to the strategy enhancements, improvements in credit
decisioning and processes, and targeted credit tightening in response to
market and regulatory changes. As a result, overall average customer quality
has improved and unit delinquency rates are lower than pre-Covid-19 (see
credit risk management section on page 136).
Mitigating actions
- Credit risk is managed within a formal credit risk management framework,
consisting of Board-approved risk appetite, credit policies and RCSA.
- The Group Credit Committee assists the Chief Risk Officer in
execution of their delegated authorities in overseeing the credit risk
management of our portfolios.
- Main credit scorecards continue to be redeveloped based on
enhanced modelling approaches and upgraded data sets.
- Credit and affordability strategies continue to be adjusted
according to the changing market and economic conditions and tightened where
appropriate.
- Portfolio performance monitoring continues to be enhanced to capture
newly emerging risks.
- Credit data and management information continue to be augmented by
newly available data sources, including the most up-to-date credit reference
data and open banking insights sourced through Snoop.
- IFRS 9 models and impairment provisioning processes have been redeveloped
with enhanced oversight from the Model Governance Committee.
Risk Pillar 3: Operational
We ensure operational risk is minimised through effective people, processes
and systems aligned to our strategic goals.
Principal risk
P8. Operational Key considerations
The risk of loss resulting from inadequate or failed internal processes, Operational risk is inherent to our Group's activities and can crystallise in
people and systems or from external events. the form of interruption or degradation in the performance or capacity of our
technology applications and operational infrastructure. Our inherent
operational risk is heightened as we deliver our activities through a
multi-site and hybrid colleague working approach, utilising in-house
capability, third-party and offshore business support. During 2023, we
increased customer operation activity with our existing offshore partners.
Whilst it is not possible, nor cost effective, to fully eliminate operational
risk, failure to build resilience and recovery capabilities into business
processes can result in customer detriment, loss and reputational damage.
Mitigating actions
- The Group's Three Lines of Defence model ensures there are clear lines
of accountability between management which owns the risks, oversight by the
Risk function and independent assurance provided by Internal Audit. The model
provides continuous integrated assurance over the effectiveness of key
controls and swift response and remediation to issues if they arise, supported
by an automated and integrated risk management system.
- Operational risk is overseen by the monthly Operations Risk Forum,
with clear lines of escalation.
- The RMF has been enhanced to drive improvement of operational risk
management assurance activity e.g. RCSA, controls testing programme, risk
event management and key risk indicators.
- An Operational Resilience programme is established and on track for
regulatory deadlines and continues to test against important business services
impacting scenarios.
- A fully implemented supplier management model is in place with a
supporting third-party risk management framework being embedded throughout
2024.
P9. Technology and information security Key considerations
The risk arising from compromised or inadequate technology, security and data The Group continues to operate on legacy IT architecture, which is being
that could affect the confidentiality, integrity or availability of the addressed by a strategic IT transformation programme. The Group is also
Group's data or systems. progressing its delivery of key security improvement initiatives against the
overall cyber security strategy, with a budgeted plan to continually improve
its overall security posture.
Mitigating actions
- Technology and change operating model has been revised into a
leaner state to reflect the Group's reprioritisation of strategic initiatives,
which will utilise the Gateway single technology platform and address key
areas of technical debt.
- Technology and information security risk is overseen by the
Technology and Change Management Committee, which also monitors and addresses
the IT services provision and performance for continuous improvement.
- A Zero Trust/E5 Programme has been initiated, which is designed to
deploy protection and defence against our endpoints, mobile devices and
servers, whilst generating a consistent security logging and event alerts for
analysis and response.
- Cyber initiatives are currently focused on improving areas
identified from the voluntary Red Test exercise carried out in H2 2023.
Conducting a threat intelligence-led Red Team Test is a recommended action
that the Bank of England and the PRA have within the CBEST supervisory tool
kit to assess the cyber resilience of firms' important business services.
- IT control effectiveness and risk maturity have been significantly
improved following the completion of the IT First Line Control Review and the
transition of risk and control ownership into business as usual activity via
the use of the Group's risk management system.
P10. People Key considerations
There is a risk that we have insufficient operational capacity and colleagues The Group has undergone a significant centralisation programme and extension
with the right skills in meeting our financial, customer and regulatory of our offshore capability, which has led to a reduction in overall headcount
responsibilities. as we seek to become leaner, more efficient and effective in serving our
customers. It is essential we have effective leadership to manage colleague
resources, effective talent and succession management and promote colleague
engagement and wellbeing.
A colleague survey was conducted on our behalf by Great Place to Work in
December 2023. We scored 56% for our overall colleague engagement score, which
is reflective of the extent of change in Q4 2023. Further details can be found
on page 16.
Mitigating actions
- Changes to our operating model are subject to a structured programme
of risk management and governance to minimise operational disruption and
promote colleague wellbeing.
- We have partnered with Great Place to Work to support our
colleague engagement and culture agenda.
- We have and maintain management responsibilities maps and succession
plans, which are in place for executive management and senior colleagues.
- Consistent frameworks have been embedded for Group reward, performance
management and talent management.
Risk Pillar 4: Strategic
We seek new business opportunities, which are aligned to our customer,
regulatory and commercial objectives.
Principal risk
P11. Strategic performance Key considerations
The risk of making and/ or executing poor strategic decisions related to The Group is initiating a strategic redirection, which seeks to strengthen and
acquisitions, products, distribution etc. as a result of ineffective grow the business in an effective and sustainable manner, meeting the needs of
governance arrangements, processes and controls. all our stakeholders. Effective risk management is critical to both the
delivery of strategy and maintaining our existing commitments in a safe and
controlled way.
Mitigating actions
- The Board and its sub-committees make risk-based decisions in the
formulation of their business strategy, in line with the GDAM and risk
appetite framework and subject to independent oversight from the Risk
function.
- Strategic and emerging risks are reported to the Risk Committee
and Board. Throughout the year, the CRO has highlighted a significantly high
level of change across the Group to both its strategic objectives and
operating model, and the broader plans in place to stabilise the business,
which has increased strategic performance risk and thus remained a key focus.
- The Risk function has had an active role providing oversight,
challenge and support to the range of strategic initiatives that have been
implemented during the year, which encompass the offshoring of aspects of
customer services, the reduction in the Group's TCR, the delivery of Gateway
across the Group and, more recently, the strategy development.
- The Group continues to quantify the actual and potential impacts
of climate-related risks and opportunities on our business, strategy and
financial planning. ICAAP activity takes account of material climate-related
financial impacts, meeting PRA requirements. Further detail of the governance
and management of the climate-related risks and opportunities and our TCFD
disclosure can be found in the sustainability section from page 19.
P12. Model Key considerations
The risk of financial losses where models fail to perform as expected due to Models are widely used across the Group and play an important role in helping
poor governance (including design and operation). achieve key business decisions, risk management and strategic objectives. The
use of models carries inherent risk to the Group due to their underlying
assumptions, methodologies and complexities. Effective model governance,
oversight and validation of models are key in mitigating model risk across the
Group.
Mitigating actions
- A model risk management framework, policies and standards are in place
and align with the PRA's Model Risk Management Principles.
- A Model Risk Committee has been established to provide model risk
oversight with supporting technical forums created to review model
developments and model performance monitoring across the Group.
- A model inventory is in place and reviewed on a regular basis.
- Material models are independently validated and corresponding validation
findings and actions are regularly tracked.
- Planned enhancements to existing IFRS 9 models and the model monitoring
framework have been completed.
Responsibilities statement
The Directors' responsibilities statement is extracted from page 92 of the
2023 Annual Report and Financial Statements.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors are required to prepare the Group
financial statements in accordance with relevant IFRS, IFRIC interpretations
and the Companies Act 2006.
The directors who held office during the financial year and to the date of
this report were as follows:
Sir Peter Estlin Chair
Ian McLaughlin Chief Executive Officer
Dave Watts Chief Finance Officer
Angela Knight Senior Independent Director
Elizabeth Chambers Independent Non-executive Director
Margot James Independent Non-executive Director
Paul Hewitt Independent Non-executive Director
Graham Lindsay Independent Non-executive Director
Michele Greene Independent Non-executive Director
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END ACSIIMBTMTBMBPIRecent news on Vanquis Banking
See all newsREG - Vanquis Banking Grp - Total Voting Rights
AnnouncementREG - Vanquis Banking Grp - Annual Report and Accounts and AGM Notice
AnnouncementREG - Vanquis Banking Grp - Director/PDMR Shareholding
AnnouncementREG - Vanquis Banking Grp - Total Voting Rights
AnnouncementREG - Vanquis Banking Grp - Non-Executive Director Changes
Announcement