Financial Conduct Authority  

FCA to probe advisers' financial resilience amid Covid

FCA to probe advisers' financial resilience amid Covid

The Financial Conduct Authority is to probe the impact of the coronavirus on advice firms' finances.

In a letter sent to regulated firms yesterday (June 2) the FCA said it would be carrying out a survey in due course to determine how financially resilient they have been in the face of the coronavirus pandemic.

This comes after the regulator promised "flexibility" for regulated firms that may struggle financially during the virus crisis.

The letter stated: "At the FCA, our core responsibilities include protecting consumers and enhancing the integrity of the UK financial markets.

"We know that financial stresses can put additional pressure on firms and so we are seeking to understand the effect coronavirus (Covid-19) is having on the finances of the firms we regulate and better guide our supervisory actions.

"Firms are reminded of their obligations under SUP 15 and where they require the FCA to be informed about the effects of significant financial stress."

The letter is being sent to a range of regulated firms, and the FCA said responses would help it obtain an accurate view of the impact of coronavirus and help it mitigate risks of harm to consumers, the market and competition.

In March the FCA said firms were able to use their capital buffers to support their going concern if needed in a seeming relaxation of its capital adequacy requirements.

Advice firms have to hold capital resources of the greater amount of £15,000 or 5 per cent of investment business annual income as a capital buffer.

Those that relied heavily on new business or investment performance could have run into trouble as markets went into turmoil, prompting industry voices such as adviser trade body Pimfa asking the financial watchdog to show "regulatory forbearance" during what it branded "extraordinary times". 

To help businesses get through the crisis the government has launched a number of initiatives, including loans and grants.

But in a Dear CEO letter in April the FCA clarified government loans granted to firms in a bid to tackle the coronavirus fallout cannot be used to meet capital adequacy requirements.

Yesterday it emerged £21bn has so far been paid to the smallest firms under the Bounce Back Loan Scheme, with 699,000 claims having been approved.

The government's Coronavirus Business Interruption Loan Scheme for SMEs has approved almost £9bn worth of claims since it went live in March and the scheme for the largest businesses had approved £1.1bn worth of loans on 191 claims.

carmen.reichman@ft.com