Financial Conduct Authority  

Brexit could hamper FCA supervision upgrade

Brexit could hamper FCA supervision upgrade

The Financial Conduct Authority is planning to invest in its pre-emptive supervisory work but Brexit could put a break on the project.

In its February board meeting minutes, published yesterday (April 11), the FCA's board stated it had set aside £5m for investment in two areas in 2019/20 – the regulator’s analytics work and increasing its pre-emptive supervisory work. 

It added this would result in "medium term efficiency savings" for the FCA. 

According to the minutes, the investments would be funded by releasing £5m from FCA reserves and by delaying £6m of "Brexit implementation costs" until 2020/21 if an agreement for a transitional period is made.

However, the investment in these areas would be reconsidered in the event of a hard-Brexit, the minutes noted. The board stated: "In this scenario, the Brexit implementation costs would be realised in 2019/20 and we would need to consider whether the £5m from the reserves was held as further EU Withdrawal contingency."

Since the board meeting the deadline for Brexit has been pushed back to October 31, after dodging both the March 29 and April 12 deadlines which could have resulted in a hard Brexit.

But the FCA was unable to confirm whether this means the investment project will go ahead.

Advisers have long said the regulator needed to do more to detect failings early and avoid cases reaching the compensation scheme, which they pay for.

Martin Bamford, chartered financial planner at Informed Choice, said: "Brexit uncertainty is causing real issues for everyone, from the person in the street to our financial regulator. 

"It’s essential the FCA can invest more in pre-emptive supervisory capability, to prevent consumer harm from occurring and the inevitable costs then falling on our FSCS levies. 

"We should all be sending our useless politicians a very clear message; deliver Brexit now, in whatever form that needs to take, so the country can get on with more important things."

The minutes also detailed that the proposal to allocate £5m of the reserves to investment in the regulator’s capabilities was "subject to agreement".

They noted: "The proposal to utilise £5m of reserves as either an additional contingency in the event of hard-Brexit, or investment in proactive supervision and data analytics in the event of a Brexit transition period, subject to agreement of detailed business cases for the new activities by the board."

Funding for 2020/21 will also be subject to further discussion concerning the wider priorities for the regulator. 

Confirmation is expected to be included its Business Plan and Annual Funding Review out later this month.