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News for Members

31 May 2016

Bank De-risking: FCA Research Findings & Response

In July 2015 the CCA  contributed to a series of roundtable discussions with the FCA on the issue of bank de-risking. We are very aware that this is an area which has caused great difficulties for a number of our members, as banks withdraw existing accounts or fail to offer new banking facilities. The FCA's research findings and response on the subject will therefore be of interest.

Research Findings

The FCA commissioned a firm of consultants, John Howell & Co Ltd to research the nature and scale of de-risking in the UK to identify what banks were doing, why and to hear experiences from organisations affected by banks' decisions.The resulting report includes data from banks and those who have been de-risked as well as existing reports and academic research.  

Of all the sectors approached, the most immediate and direct response was received from small and medium sized home credit businesses where the sudden termination of viable businesses after years of indifference or neglect by banks was found to be a recurring theme. (Click on the link at the end of the article to view the research report)

FCA Response

The research report demonstrates that de-risking is the result of a complex set of drivers and there is no 'silver bullet' to solve it.  However, the report does note some potential pathways towards mitigating this issue may lie in balancing costs and risks between banks and high risk sectors, and a better developed understanding of how to measure money laundering and terrorist financing risk on a ‘case by case’ basis.The FCA has stated that it will continue to work with the banking industry to lessen the damaging effects of de-risking without constraining banks' commercial freedom. This work will include:

improving the way in which firms identify money laundering risk

taking steps to foster innovation and reduce cost in AML compliance

delivering a global response to de-risking

encouraging better communication between banks and their customers

improving effectiveness of AML supervision

We suggest that our members read both the research findings (particularly page 53 which is relevant to the home credit sector) and the FCA's response.  Visit the FCA website to access both documents.

CCA News

CCA News - January 2015 cover

Our quarterly magazine, CCA News, keeps our members up to date with all the latest news and issues affecting the home credit industry.

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