United Kingdom (and EU regulation)

FCA publishes coronavirus financial resilience survey data

On 7 January 2021, the FCA published the results of its COVID-19 financial resilience survey data.

The surveys were sent to solo-regulated firms to inform the FCA of the impact of the pandemic on firms’ financial resilience. The surveys did not cover the 1,500 largest firms in the UK financial sector who are regulated by the PRA.

Results from the surveys include:

The FCA expects that failures due to the current economic downturn are likely to disproportionately impact some sectors and types of business models, creating potentially significant harm to consumers. This could reduce effective competition, and/or damage the overall effectiveness and reputation of the market in which the firms operate.
From the FCA’s analysis, a coronavirus-driven market downturn may cause significant numbers of firms to fail over the next 12 months.
Retail Lending and Retail Investments had the highest proportion of respondents expecting a negative impact on net income (67% and 66% respectively) due to the pandemic. This was closely followed by Insurance Intermediaries & Brokers (60%), Payments & E-Money (57%), Wholesale Financial Markets (35%) and finally the Investment Management sector (27%).
In terms of the pandemic’s impact on business models, the sector with the least negative outlook was Investment Management, with 73% of firms expecting a positive or neutral impact and 27% expecting a negative impact, followed by Wholesale Financial Markets where 64% were positive or neutral and 36% negative, Retail Investments where 58% were positive or neutral and 42% negative. For Payments & E-Money, the majority of firms had a negative outlook, with 46% of firms positive or neutral and 54% negative. The most negative outlook was in Retail Lending where 42% of firms were positive or neutral and 58% were negative.
In terms of government support schemes, the take up varied across sectors. Proportionately, Retail Lending had made most use of the available government support (49% of Retail Lending firms had furloughed staff and 36% had received a government backed loan), followed by Insurance Intermediaries & Brokers (44% had furloughed staff and 19% had received a loan), Retail Investments (37% had furloughed staff and 15% had received a loan), Payments & E-Money (36% had furloughed staff and 11% had received a loan), Wholesale Financial Markets (16% had furloughed staff and 11% had received a loan) and finally Investment Management (8% had furloughed staff and 3% had received a loan).