Regulator to review mechanism that allowed now collapsed bank to operate in UK without a licence<\/p>\n
Last modified on Wed 12 May 2021 14.27 EDT<\/p>\n
The head of the UK financial regulator has promised to consider imposing restrictions on a system that allowed the now collapsed bank Greensill Capital to operate in the UK without a licence.<\/p>\n
Nikhil Rathi, the chief executive of the Financial Conduct Authority (FCA), told MPs that Greensill\u2019s failure had led the regulator to look \u201cmuch more closely at the systems of control that the principle has in place and potentially also plac[e] some restrictions on the scale of business that can be undertaken through this mechanism\u201d.<\/p>\n<\/p>\n
Greensill was able to do some of its business by piggybacking off US-based Mirabella Advisers, which is licensed in the UK. It meant Mirabella had the responsibility to ensure that Greensill was playing according to the rules, while Greensill was not regulated by the FCA.<\/p>\n
Rathi has said the FCA was \u201cformally investigating\u201d the circumstances leading to the the bank\u2019s collapse, and said that some of the allegations facing Greensill were \u201cpotentially criminal in nature\u201d.<\/p>\n
\u201cWe are also cooperating with counterparts in other UK enforcement and regulatory agencies, as well as authorities in a number of overseas jurisdictions,\u201d Rathi added in a letter to the select committee released on Tuesday.<\/p>\n
He was speaking to MPs on parliament\u2019s Treasury select committee to answer questions about the FCA\u2019s oversight of Greensill.<\/p>\n
David Cameron, the former prime minister who was employed by Greensill and owned an undisclosed stake in the company, is due to appear before MPs on the committee on Thursday.<\/p>\n
Rathi said the appointed representative system was launched in the 1980s to allow small, self-employed providers to be freed from the requirement to get a licence and be overseen by the regulators.<\/p>\n
\u201cIt\u2019s evolved over time. I certainly don\u2019t think it would be proportionate for the FCA to supervise a sole trader that\u2019s selling insurance in their local market, or a self-employed mortgage broker \u2026 and that\u2019s what the regime was designed for,\u201d he said.<\/p>\n
\u201cIt\u2019s moved into much more complex areas, and it\u2019s quite liberal in terms of the range of activities an appointed representative can undertake \u2026 Basically, everything other than deposit taking and managing investments.<\/p>\n
\u201cThat feels to me like we need to be looking much more closely at the systems of control that the principle has in place and potentially also placing some restrictions on the scale of business that can be undertaken through this mechanism.\u201d<\/p>\n