FCA warns 4,000 firms could fail in Covid-19 crisis
By Sean Farrell
Date: Thursday 07 Jan 2021
(Sharecast News) - As many as 4,000 financial services businesses are at increased risk of failure because of the Covid-19 crisis and almost a third of these could cause harm to consumers, the City regulator said.
The Financial Conduct Authority said its survey of 23,000 firms found insurance brokers, payments and emoney and investment management businesses suffered lower liquidity during the first Covid-19 lockdown.
The survey found 59% of respondents expected the crisis to reduce net income. Of these, 72% expected the impact to be no more than 25% and 3% expected the impact to be be more than 75% in the following three months.
The FCA said at the end of October it had identified 4,000 businesses with low financial resilience and a heightened risk of failure. These were mainly small and medium-sized firms and about 30% had the potential to cause harm if they went bust, the regulator said.
Sheldon Mills, the FCA's head of consumers and competition, said: "A market downturn driven by the pandemic risks significant numbers of firms failing. Our role isn't to prevent firms failing but where they do we work to ensure this happens in an orderly way. By getting early visibility of potential financial distress in firms we can intervene faster so that risks are managed and consumers are adequately protected.'
The survey did not cover the 1,500 biggest financial companies, which are regulated for financial stability by the Bank of England.
The FCA sent out its questions in June and August, before the government extended its furlough support scheme, the announcement of successful coronavirus vaccines and the latest strict lockdown. The regulator said it would repeat the exercise as the situation changes.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN