Talking Regulation: How has the efficiency of FCA applications for authorisation progressed in 2022?

In March of this year, we held a webinar that looked at the FCA gateway, which processes all applications and authorisations, to examine how the transformations that we are seeing take place internally at the FCA are changing processes, procedures and the level of scrutiny applied. This talking regulation blog by James Borley, acts as an update to how things have progressed since then.

"There has been much publicity regarding the FCA’s authorisations backlogs over the past year or so and to my mind, there are two drivers for this:

1. A reduced risk tolerance resulting in a more assertive FCA with a more robust gateway

2. An unsettled workforce following proposals to change the structure of staff salaries and bonuses, resulting in staff turnover and disaffection

While we have seen definite improvement in allocation and processing times, undoubtedly helped by the recruitment of 100 additional staff across the Authorisations department, there are still historic applications that have been under assessment for the best part of a year.

What remains is the direction of travel that the FCA is heading in. Quite rightly, they are applying more scrutiny to applications than before, to ensure only the ‘good guys’ get in. Or, as Nikhil Rathi and Richard Lloyd recently explained to the Treasury Committee, “intervening earlier and faster” where applicant firms “don’t meet our standards” in order to “protect consumers and market integrity”. However, it seems as if some ‘good’ applications are nevertheless unsuccessful, where the FCA asserts a subjective view that an applicant doesn’t meet the ‘threshold conditions’; by ‘subjective’ I mean that the reason given can be open to interpretation, with the applicant (and ourselves as consultants) and the FCA taking a different view of what ‘good’ looks like, resulting in the FCA suggesting that it will consider refusal of the application (unless the application is withdrawn).

In considering whether the FCA will be likely to speed up Authorisations in 2023 and linking this to its competition objective, I don’t personally believe the FCA sees the authorisation process as key to evidencing ‘competitiveness’. After all, it has no competition (as a regulator) itself and so its actions will have little direct consequence on it. It certainly puts consumer outcomes and market integrity ahead of competition considerations. The ‘competitiveness’ of UK plc is another matter. That is more a political question; traditionally, the FCA has sought to emphasise its independence from Treasury and UK government policy, taking its responsibilities and independence as a regulator seriously and not being swayed by external influence. As such, there has been (and continues to be) a perceived mismatch between government aspirations for the UK to be a fintech destination (‘Singapore on Thames’ anyone?) and the robust gateway referenced above.

All that being said, we are already seeing the impact of the FCA’s latest recruitment drive, with the timing of authorisations clearly starting to improve, both in terms of the timing of allocation of a new application to a case officer (from several months to a matter of weeks) and the average application determination times, as illustrated in the FCA’s recent helpful update."