On 26 February 2025, the Financial Conduct Authority (FCA) published a speech on ‘Helping markets thrive and managing systemic risk: the FCA’s approach to non-bank leverage’, which was delivered by its executive director of consumers, competition and international, Sarah Pritchard, on 25 February 2025.

Key points from the speech include:

• The UK non-bank finance sector manages around £14.3 trillion in assets and continues to grow. Ms Pritchard notes that whilst the sector’s use of leverage can help boost returns, enhance efficiency and manage risks, it can become a vulnerability and source of systemic risk when the leverage is concentrated or crowded.

• The FCA is of the view that targeted improvements to public and private disclosure could go a long way in mitigating the build-up of systemic risk from non-bank financial intermediation (NBFI) leverage, by giving NBFIs access to adequate data and information about the markets in which they operate and the risks to which they are exposed.

• Regulators also need to have the necessary data, systems and tools in place to effectively monitor NBFI leverage use and identify systemic risk. Considering the FCA’s regulatory remit and patterns of leverage use in the UK market, fund managers covered by the Alternative Investment Fund Managers Directive will be an area of focus for the FCA, although the NBFI sector is much broader than that.

• The FCA is playing a leading role in this area, and co-chairing a working group to support the ongoing Financial Stability Board consultation on a suite of proposals on monitoring and addressing systemic risk arising from NBFI leverage. Ms Pritchard notes that in many cases, the issues highlighted in the report are the same ones the FCA is already prioritising in its domestic work.