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August 14, 2019updated 31 Jul 2019 4:39pm

FCA eyes firms on the regulatory perimeter

By Brian Cantwell

In response to a series of cases in the mainstream press, including the RBS GRG case, the UK financial regulator has outlined where its powers lie, and how it could react to further challenges to its regulatory perimeter. Brian Cantwell reviews its report.

In a defensive policy statement last month, the Financial Conduct Authority (FCA) outlined its responsibilities in a policy document called the perimeter report.

While the report does not promise any change to the perimeter, and repeatedly says it is up to government and Parliament to change the powers it has, it is useful for the leasing industry to get a peak over the fence as to the intentions of the regulator regarding the status quo.

In previous years much of the regulatory penumbra for servicing micro-SMEs has come into the jurisdiction of the FCA, as has becoming FCA approved for finance brokers doing any consumer business, even if it was a tiny percentage of the book.

It seems as if this document, while essentially saying little new, does signal a willingness from the regulator to look beyond its jurisdiction in a speculative sense, and make recommendations to MPs and the Treasury.

As regards solid intentions, there seemed to be three:

  • The FCA will now constantly monitor the regulatory perimeter, including more close work with the Financial Ombudsman Service, the Financial Services Compensation Scheme, and industry and consumer groups;
  • Monitor activity outside its jurisdiction that could cause consumer harm and require the perimeter to be widened, including enforcement action, and recommendations to government and parliament, and
  • Scanning to keep an eye on market developments and innovations. The FCA gives the example of cryptocurrencies but LL suggests that this may include online platforms and portals that could sell asset finance but to a wider audience. “Looking ahead, we know that technology companies entering the financial services sphere are likely to have a major impact on both firms and consumers in the UK, even if their activities fall outside the perimeter,” it writes.


The first annual report of its kind, the timing is in response to large financial failures publicised in the mainstream press over the past few weeks.

For example, London Capital & Finance, an unregulated retail bond scheme that went bust with £236m (€263m) of investor’s money, caused the public to question how financial regulation covers the markets.

Similarly, the RBS Global Restructuring Group (GRG) report and reaction in the media called the FCA’s role into question – City AM, as just one example, reported MPs’ reaction to the FCA GRG final report as a “whitewash”.

“How are financial services to be trusted if seemingly unfair practice is allowed to go unchecked?” went the thinking. Similarly, those in banking and business who pay the levies that keep the current regulatory system afloat were dismayed – they would have to bear the cost of this in the public perception of both consumer and commercial financial services.

Duly, with its reputation questioned, the FCA set out its regulatory “perimeter”, where it fundamentally reminded the public and press that it was up to Parliament to legislate for any real extension of the regulator’s powers.

There has already been some regulatory creep, as the Financial Ombudsman Service gains greater powers for redress of SME banking issues that will affect those providers in the leasing market providing consumer services.

Buck-passing aside, chief executive Andrew Bailey outlined how the FCA is dealing with firms at the edge of its regulatory perimeter, especially those that are harming consumers and markets. He also covered the speed of change of innovation and new products that can test the regulatory boundaries, and the future of regulation post-Brexit.

“A number of factors test the [regulatory] perimeter, and it must be kept under constant review. It is tested by the actions of particular firms and how those actions can harm consumers, for instance by firms innovating and creating new product offerings and services and by firms deliberately trying to avoid our perimeter,” wrote Bailey.

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