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New financial services approval times increase by 85 per cent

Delays are 'placing extra burden on firms and having a detrimental effect on competition'

6 May 2015

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The length of time the Financial Conduct Authority (FCA) takes to approve firms to conduct new regulated financial services has increased by 85 per cent in the last two years.

Approval times have increased from 10 to 18 weeks.

Law firm, RPC (who conducted the research), believe that the delays are the result of greater scrutiny of firms' business plans and the amount of resourcing to be allocated to the new services.

Richard Burger, a partner at RPC, commented: 'Delays by the FCA in approving firms to move into other areas of business are placing extra burden on firms and having a detrimental effect on competition in the financial services sector.

'If new permissions are being sought by established firms with experienced, approved managers, it is hard to see why new permissions should take so long.'

If a firm decides to offer a new service line through subsidiaries, the FCA is likely to request increased levels of capitalisation to protect customers from any losses.

RPC thinks that this can undermine a businesses return on capital, making new ventures less profitable and companies unlikely to take the risk, which in turn will reduce options available to the consumer.

'Many of the applicants are smaller lenders, or innovative consumer finance providers', said Burger.

'At a time when it is widely recognised that new sources of financing for SMEs and consumers are a priority for the UK economy, the timeframes for approval are important.'

He continued: 'Starting in new business lines carries an inherent risk, which is a positive thing for the long term health of the market.

'This cannot be entirely regulated away. When the costs of obtaining permissions begin to become prohibitive consumer choice is likely to be damaged.'

 

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