On 15 April 2020, the FCA published a Dear CEO letter concerning lending to small businesses.

Key points in the Dear CEO letter include:

  • The activity of lending to an SME sits mostly outside the FCA’s scope but the Senior Managers and Certification Regime (SMCR) defines the responsibilities and accountability of senior managers in banks in a way which applies to all activities they conduct whether they are regulated or not.
  • The FCA expects that for each bank that lends to SMEs there is a Senior Manager, or Senior Managers where appropriate, with clear responsibility for that activity.
  • The FCA recently recognised as an industry code the Lending Standards Board’s Standards of Lending Practice for Business Customers. This code will be something the FCA will consider in how Senior Managers and other relevant employees under the SMCR discharge their duties.
  • The FCA expects CEOs to take reasonable steps, along with their board, to ensure that the Senior Managers with responsibility for small business lending is discharging his/her responsibilities suitably.
  • The FCA will look for evidence that, in discharging its oversight role, the board is collecting information on the bank’s treatment of SMEs and, where appropriate, challenging the Senior Manager. The FCA’s objective will be to ensure that there is not a repeat of the historic issues in the treatment of SMEs.
  • The FCA will take into account of the fact that, consistent with the objective to pass credit to firms, banks may now be making different judgements and adopting a different risk tolerance than they would prior to the COVID-19 pandemic in order to support SMEs.
  • The FCA has established a new small business unit, headed by one of its senior leadership team, Andrew Wigston.