Financial groups face delays in gaining FCA approval

Financial groups that want to expand into new areas are facing increasing delays in getting approved by the UK's markets watchdog, with the time taken for authorisations nearly doubling since the regulator was set up two years ago.

The Financial Conduct Authority, which oversees the approval process for 73,000 firms from the largest banks to high-street advisers, took on average 18.5 weeks in the last quarter of 2014 to grant permission to companies to launch new business lines, according to fresh data. The waiting period has crept up since the beginning of 2013 when such approvals took just 10 weeks on average.

Authorisation delay is a sensitive topic for the regulator, created in 2013 when the old Financial Services Authority was divided in two.

A National Audit Office report published a year after the split flagged that waiting times had increased by three weeks over mere eight months as the FCA and its sister regulator, the Prudential Regulation Authority - which oversees the safety and financial soundness of the largest lenders and insurers - sometimes took different decisions on whether a new firm should be approved, or whether an existing regulated company should be allowed to open new business lines.

Both agencies are taking a more cautious approach to approving firms and individuals in the wake of the financial crisis and after scandals that questioned regulatory decision-making, such as the FSA's 2010 rubber-stamp of the Co-operative Bank's appointment of Paul Flowers as chairman. Mr Flowers, a former Methodist minister, was charged with drugs offences in 2014 and received a fine, while the bank he used to chair almost collapsed because of a £1.5bn hole in its balance sheet.

The current authorisation delays may arise because the FCA tends to demand high levels of ringfenced capital where the company sets up a new business line as a separate subsidiary. It also requires higher numbers of compliance and operational staff, legal experts said.

Both requirements go to protecting consumers and reducing the chance of failure but both also weigh on a company's potential for profit.

"Many of the applicants are small lenders, or innovative consumer-finance providers," said Richard Burger, a partner at Reynolds Porter Chamberlain, the law firm that gathered the data. "At a time when it is widely recognised that new sources of financing for SMEs and consumers are a priority for the UK economy, the timeframes for approval are important."

The FCA declined to comment. It is facing particular demand for so-called variations of permission from hedge funds, consumer-credit firms - which the FCA only began to regulate in 2014 - and also from companies that want to benefit from recent pension liberalisation reforms ushered in by George Osborne, the chancellor.

Reforms give those aged over 55 freedom to take their pension savings as they wish and avoid having to buy an annuity.

The FCA is concerned that unscrupulous firms could defraud vulnerable pensioners out of their life savings, with the watchdog's chief executive, Martin Wheatley, flagging pension reform as an area that the regulator will be making a priority over the next year.

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