UK Conduct Regulator Says Banks Must Have a Senior Manager Responsible for the Unregulated Activity of Lending to Small Businesses

The U.K. Financial Conduct Authority has published a Dear CEO letter to U.K. regulated banks on lending to small businesses. In the letter, the interim Chief Executive, Christopher Woolard, reminds banks about the importance of ensuring that the benefits of the Government's Coronavirus Business Interruption Loan Scheme are passed to the businesses and consumers that need it. The FCA confirms that it and the PRA are monitoring the level of lending to businesses.

The FCA also sets out its expectations of banks, in particular their CEOs, boards and senior management. Despite lending not being regulated in the U.K., the FCA expects a bank that lends to SMEs to appoint at least one Senior Manager under the Senior Managers Regime to have responsibility for the bank's SME lending activity. The Senior Managers Regime applies to all activities conducted by a bank, regardless of whether the activity is regulated. The FCA also expects bank CEOs and boards to ensure that the Senior Manager is discharging his or her responsibility suitably and to challenge a Senior Manager where this is not the case. Boards should be collecting information on the bank's treatment of SMEs to ensure that the bank is treating its SME customers fairly.

The Dear CEO letter also informs CEOs that the FCA has established a new unit to coordinate all of the regulator's activities across small business issues. The aim is to support regulated financial institutions through these challenging times and to ensure the fair treatment of SMEs.

View the FCA's Dear CEO letter on lending to small businesses.

Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.

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