The head of the Financial Conduct Authority has repeated his predictions for a post-pandemic market and warned regulators a "significant" number of financial firms will fail in the months ahead.
In a speech delivered to the City regulators at Mansion House yesterday (November 12) Nikhil Rathi said small firms were in the firing line of financial pressures emerging from the coronavirus crisis.
But the newly appointed chief executive of the FCA doubled down on his previous warning that the regulator was not in a position to stop some of the firms under its watch from failing.
Mr Rathi said: "The financial impact of the pandemic is being felt by the firms we regulate, too.
"Ultimately, we can’t intervene to stop firms from failing in the face of economic distress and sadly we do expect a significant number of regulated firms, particularly smaller firms, to fail in the months ahead, but it is our job to ensure that where this happens, the resulting harm and loss to their customers and the wider financial system is kept to a minimum."
It was a similar rhetoric to that shared with MPs earlier this month when Mr Rathi said 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 City watchdog has probed the financial stability of the advice market twice since June via mandatory surveys.
Speaking on an FCA podcast this week Mr Rathi said the watchdog was not a "zero-failure regulator" and regulated firms did not "operate in a vacuum" and were subject to the same economic forces as "any other business".
Despite his solemn prediction Mr Rathi also praised those on the "financial services frontline", who he credited with keeping "vital services available in rapidly changing circumstances" during the pandemic.
He said: "Branches and call centres could only remain open if people were willing to keep serving customers. Our IT systems kept running because of the engineers who work night and day.
"My FCA colleagues worked at remarkable speed to introduce measures to protect consumers and to keep markets functioning."
In particular the FCA boss pointed to the regulator's work in the mortgage market, which recently saw it extend payment holidays for borrowers struggling amid the crisis by another six months.
Mr Rathi told regulators yesterday more than 4.4m deferrals had been granted to borrowers across mortgages, credit cards and personal loans.
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