In an open letter to City Minister Andrew Griffith and Kevin Hollinrake MP, the commercial finance broker trade body shared how elements within the Basel III regulations and the FCA’s Consumer Duty are likely to impede capital provision, raise funding costs, and cause a divergence in regulatory approaches through a lack of clarity.
The NACFB joined wider calls for a greater examination of the unintended consequences that the Basel III framework will bring and encouraged both the Bank of England and the PRA to show their workings by releasing supporting data that justifies their continued approach ahead of its implementation. Lending volumes grew in 2022 with challenger and specialist banks accounting for a record share of gross lending. These same institutions could now be met with punitive measures that will likely increase borrowing costs and reduce market competition.
The Association also called upon HM Treasury to insist that the FCA provides greater clarity as to whether the Consumer Duty only applies to regulated products or if it extends to regulated activities supporting non-regulated products. Both commercial intermediaries and their lender counterparts require greater clarity as to the expectations placed upon them. The NACFB believes that current definitions leave too much room for differing interpretations, muddying the waters during the implementation phase.
Commenting on the concerns, NACFB Chair, Paul Goodman (pictured), said: “The letter calls for critical action to mitigate against the worst impacts of two pivotal regulatory frameworks on our horizon. We wish to stress the very real short-term impacts any inaction will bring.
“We strongly believe both measures as they currently stand will reduce access to finance for the UK’s small business borrowers in the immediate term.”
The NACFB’s full open letter can be found online here.