Businesses have to wait longer for FSA authorisation
In Q2 it went up to 21.1 weeks from 19.5 weeks in Q1, according to City law firm Reynolds Porter Chamberlain LLP (RPC).
According to RPC, authorisations took an average of 7.9 weeks before the credit crunch started in 2007, so businesses now have to wait 167% longer before the FSA agrees to authorise them.
Financial services firms cannot undertake business until they are authorised by the FSA.
Commenting, Jonathan Davies, regulatory partner at RPC, said: “The question in my mind is whether the FSA is taking longer to authorise firms because it is being more rigorous or whether it is because it is haemorrhaging its more experienced staff and cannot keep up with the workload.
“If it is that they are being more rigorous, what does that say about the FSA’s approach to authorisation just a year ago?
“If, on the other hand, the FSA lacks the resources to cope effectively with requests for authorisation then that will raise major concerns in the financial services sector.”
RPC says that the number of applications to the FSA for corporate authorisation to conduct regulated business has fallen substantially since the credit crunch.
The FSA received 1,375 authorisation applications between April 1 2008 and March 31 2009 at the height of the credit crunch, 37% less than at the height of the boom when it received 2,193 applications in 2006-7.
Jonathan Davies commented: “Fewer financial service businesses have been trying to enter the market since the credit crunch started so it is even more astonishing that FSA authorisations are taking so long.
“These delays risk reducing competition and harming the City’s international competitiveness. Is the legacy of the credit crunch really going to be that consumers suffer because of a lack of competition between financial service providers?”
Davies points out that it is still unclear how the authorisation process will work once the FSA’s role is split between the new Bank of England arm – which will oversee prudential regulation of banks and insurers – and the new Consumer Protection and Markets Authority.
“Financial services firms will be concerned that it may become even more complicated to get authorisation – or that it might take even longer,” he said.