During a conference at yesterday’s successful FP Show at London Olympia, the FCA explained that regulation had not been put in place to hinder profit making.
The FCA’s Louise Marfany told a skeptical audience that the authority recognised that smaller operations in the financial industry needed to be successful, profitable and sustainable, but insisted that they could grow under regulatory procedures.
“I wouldn’t want anyone to leave this room under the misapprehension that the FCA believes that there’s somehow some shame in making money,” Louise said.
“Profit is not a dirty word within the FCA,” Louise added, stating that the watchdog expects to engage with small firms, and sole traders whose fundamental skill set and objective is to be a businessperson first.
“Now, we do acknowledge and don’t necessarily apologise for the fact, that we [are] asking those firms also, as part of that, to take on some responsibility for compliance, but we hope we have tried to balance that so that it’s not a disproportionate burden on firms,” Louise concluded.
During the conference, Stephen Johnson, Deputy CEO and Managing Director, Commercial Mortgages of challenger bank Shawbrook Bank, said he expects some brokers to leave the market because of the increased burden of regulation.
“I think there will be some fall out – some firms, smaller firms in particular, will not go on this journey,” Stephen said.
Stephen stated that he thinks it’s better for the rest of the people in the market who are adding an enormous amount of value.
“It’s a market that can sometimes get tarnished [by the] behavior of a few,” Stephen said, adding that he is hoping that standards and professionalism will increase on the back of regulatory change.
“I think that will be good for the participants that are embracing it and have the right professional standards, so hopefully that’s helpful.”
The role of challenger banks was another topic discussed at the conference.
Some believe a recent move into the short term lending market will have a detrimental impact on the niche players.
However, James Bloom, Chief Executive at development lender Regentsmead, thinks that current limitations on banks mean that there will still be a space for unregulated lenders.
“They are still going to be a bank, they still won’t be able to do what a niche provider can do – particularly those that lend their own capital.
“They will always have constraints and regulation, and they will not be able to perform [ever], as they freely admit, in the same way as a niche lender.
“They will certainly have an effect on some of the more traditional lenders, but I think the niche lenders that have their own space and their own way of working – there will always be a place for them.”