Financial Conduct Authority  

FCA will not 'stop firms from failing'

FCA will not 'stop firms from failing'

The chief executive of the Financial Conduct Authority has warned it is not a "zero-failure regulator" as firms under its watch risk succumbing to the financial pressures of the coronavirus crisis. 

Nikhil Rathi, who took up the reins at the City watchdog last month, said the firms which it regulates did not "operate in vacuum" and were subject to the same economic forces as "any other business". 

Speaking on the FCA podcast today (November 10) Mr Rathi said: "We know that [the pandemic] has resulted in financial pressure for a number of the firms we oversee.

"We cannot stop some of the firms that are under FCA oversight from failing.

"We are not, nor should we be, a zero-failure regulator.

"Instead we work to ensure we have the information we need to understand when firms are close to failure to help manage that process and ensure that risks are managed and consumers are adequately protected."  

His comments come a week after he told MPs small advice firms and self-invested personal pension providers would particularly struggle to cope during the second national lockdown.

The FCA boss told the Treasury select committee the second round of coronavirus restrictions could serve as a "tipping point" for these firms.

The FCA has probed the financial stability of the advice market twice since June via mandatory surveys. 

The results of the first round of financial surveys painted a fairly resilient picture in the aftermath of the first coronavirus wave, with a mere 14 advice firms admitting to the regulator the economic fallout of the pandemic threatened the survival of their business. 

But since then research from the Personal Finance Society and NextWealth has pointed to a bleaker business outlook. Of the 365 PFS members surveyed as part of the research, three quarters had seen gross revenues fall due to Covid-19, with a fifth forecasting a decline of at least 20 per cent.

rachel.mortimer@ft.com

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.