Close to 70 per cent of financial services firms have described the Financial Conduct Authority’s (FCA) authorisation process as unnecessarily long.
The findings come from a survey of 3,883 regulated firms, which shed light on their views on the effectiveness of the financial regulator. It found that 68 per cent of firms did not think the amount of time taken by the FCA to authorise a firm was reasonable, more than double the amount of respondents who felt it was reasonable.
The results chime with a number of peer-to-peer lending industry stakeholders, who have complained to Peer2Peer Finance News about lengthy approval times.
The FCA noted that its new authorisation process, which will see more decisions taken by its senior managers rather than the Regulatory Decisions Committee, will enable it to make faster decisions for consumers, markets and firms.
At present, an individual or new business seeking FCA approval has the right to present his or her case to the FCA decision maker, and on occasion to the Regulatory Decisions Committee. However, under the new rules – which are largely opposed by regulated firms – decisions will be taken on paper by FCA officials.
Read more: The top 10 things the FCA is focusing on
While the City watchdog said it was taking on board feedback about the time taken for authorisations to complete, it also highlighted respondents’ concerns that more thorough background checks are needed to identify owners of failed firms seeking to rejoin the industry.
Close to 33 per cent of ‘flexible’ firms, which are supervised by the regulator on a reactive basis, said the regulator should conduct more due diligence checks as part of the authorisation process, while 21 per cent said the FCA should do more to prevent owners or directors of failed firms from re-entering the industry.
“This is a fine balance to be considered,” the FCA noted.
Time to take action
Elsewhere, companies expressed their concerns that the FCA’s approach is too reactive, rather than proactive, when it comes to identifying risks. For example, 21 per cent of flexible firms felt there were significant or emerging risks in their market that the FCA was not aware of. They cited insufficient regulation and monitoring as two common themes.
In a separate survey carried out with 224 consumer credit firms, equating to only 9 per cent of firms invited to take part, one in 10 respondents said the FCA had not successfully identified emerging risks in the market. This compares to 49 per cent who felt the FCA had performed well in this respect.
Less than half of consumer credit firms felt the watchdog had supported their business well during the pandemic, while seven in 10 described the FCA as an effective regulator.
The survey also found that consumer credit firms are likely to have less regular contact with the FCA in comparison to non-consumer credit businesses. Close to a quarter said they had dealings with the FCA at least once a month, but few engaged with the regulator’s website: only eight per cent said they had visited the site at least once a month. In addition, two thirds of firms said they had never attended an FCA virtual event.