Financial resilience surveys: firms could fail - Thistle Initiatives

What is happening?

The FCA published in January 2021 the results of its coronavirus financial resilience surveys sent to solo-regulated firms.

Firms will be aware that the FCA had issued the first phase of its Covid-19 impact survey in June 2020, covering around 13,000 firms across 15 supervision portfolios (known as Tranche 1), and had rolled this out to a further 9,500 firms in 21 portfolios (Tranche 2) at the beginning of August. It then repeated this survey for both Tranches 1 and 2 to understand the change in firms’ financial positions with time. The FCA is now repeating this survey for the third time.

What do you need to do?

The surveys’ results show that between February 2020 (pre-lockdown) and May/June (during the impact of the first lockdown), firms across the sectors experienced a significant change in their total amount of liquidity. This was defined as cash, committed facilities and other high-quality liquid assets. Three sectors saw a decrease in available liquidity; insurance intermediaries and brokers (30 per cent), payments and e-money firms (11 per cent), and investment management (2 per cent).

At end of October, the FCA identified that there are 4,000 financial services firms with low financial resilience and at heightened risk of failure, although many are expected to be able to bolster their resilience as and when economic conditions improve. These are predominantly small and medium-sized firms, and approximately 30 per cent have the potential to cause harm in failure, which is a key consideration for the FCA.

The third survey will be sent to the relevant firms in Tranche 1 on one of the following dates:

• Batch 1: to be sent on 13 January 2021 – response due by 3 February 2021
• Batch 2: to be sent on 14 January 2021 – response due by 4 February 2021
• Batch 3: to be sent on 15 January 2021 – response due by 5 February 2021
• Batch 4: to be sent on 19 January 2021 – response due by 9 February 2021

A warm-up/introduction email will be sent to all the firms at least one day prior to them receiving the survey.

This survey, completion of which is mandatory, will include ten questions in total, designed to give information about the following areas:

• Liquidity/ cash availability and needs
• Recent financial performance
• The scale of business activity
• Access to government schemes

It will be sent to all firms in the following Tranche 1 portfolios unless they satisfy specific exclusion criteria:

• E-money issuers
• High-cost lenders
• Payment services firms
• Peer-to-peer lending platforms
• SIPP operators
• Advisers and intermediaries
• Contracts for differences (CFD) providers
• Credit reference agencies and providers of credit information services
• Crowdfunders
• Custody services providers
• Debt purchasers, debt collectors and debt administrators
• Mainstream consumer credit lenders
• Personal and commercial lines insurance intermediaries
• Platforms
• Wealth management firms

Firms will be emailed a link to complete the survey online; it is designed to be easy to complete within no more than an hour.

How can we help you?

If you’d like to know more about how we can help you with your liquidity management or FCA enquiries into this area, or with any other aspect of FCA compliance, our expert team is here to help.

Contact us today on 0207 436 0630 or email info@thistleinitiatives.co.uk.