The Financial Conduct Authority is planning to replace its Financial Resilience Survey with a new financial resilience regulatory return for solo-regulated firms.
The regulator launched its Financial Resilience Survey in June 2020 at the height of the pandemic to collect basic financial data from 23,000 legal entities to assess the risks to consumers of firms going bust.
It said it has continued to collect the data via additional surveys roughly every quarter as it, “has been essential in helping us to understand the risk of firm failure as well as risks across the financial services sector.”
It said the data had helped it take action on more than 100 firms where “material concerns” had been identified.
The firms had to increase capital, put new wind-down plans in place and/or were prevented from taking on new business while they addressed the underlying financial resilience issues.
The FCA said: “As a result of these actions, these firms are less likely to undertake a disorderly wind-down that could have resulted in harm for both consumers and market integrity,”
But it said it believes the current approach of collecting the data through ad hoc surveys “places significant administrative burden on firms.”
“We are, therefore, proposing to rationalise and standardise this data collection in the form of a regulatory return.”
The new return will be known as ‘FIN073 – Baseline Financial Resilience Report’.
The data collection will be moved onto RegData, the FCA’s data collection platform for gathering regulatory data from firms.
The regulator said firms in the scope of FIN073 will benefit from the standard features of RegData that a survey tool does not offer, such as easier access to guidance, including data definitions, and the ability to access previous submissions.
Firms will also be able to see FIN073 in their forward schedule in RegData, making it “significantly easier” for them to plan.
The FCA proposes to include five questions in the new return, lower than the nine questions in the existing financial resilience survey.
The FCA said: “While all FRS questions give us valuable data, we have exercised further proportionality in the proposed transition to FIN073 to reduce the questions and manage the burden on firms.”
However, the new regime will mean fresh costs to firms with the regulator predicting a £14.9m one-off cost as well as £2.5m ongoing annual costs that firms will have to pay. There will also be familiarisation costs which the FCA estimates to be around £1,014 for medium firms, and around £216 for small firms.
The FCA is seeking feedback to its proposals until 2 December.
Following the consultation, the FCA will publish a policy statement and final rules in the Spring.
