The Treasury has today announced amendments to the UK’s CBILS scheme to support small businesses. This statement sets out the FCA’s approach to its regulation of firms in relation to the Government’s CBILS and BBL schemes.
The unprecedented nature of the current coronavirus pandemic and the impact on the economy has created a climate of deep uncertainty and anxiety for the economy, business and consumers. The FCA recognises the Government’s CBILS schemes need to be able to take fast and efficient lending decisions. To ensure this, the Government has today made changes to the criteria lenders must apply when considering firms for a loan under these schemes.
Relationship between our Rules and the Schemes
We have been working closely with the Government and the British Business Bank on the changes to CBILS and the launch of BBL and will continue to do so. In the meantime, we recognise the need to make the changes to the CBILS scheme immediately. As an interim measure, pending the roll-out of the BBL scheme, if firms comply with the relevant requirements of CBILS as announced today, we do not expect them to comply with CONC 5.2A.4-34 where the lending is regulated. CONC 5.2A contains rules and guidance on carrying out a reasonable assessment of a customer’s creditworthiness before taking the process forward. But firms must continue to carry out creditworthiness assessments in line with the whole of CONC 5.2A on all other regulated lending.
It is also important we give clarity to relevant individuals under the Senior Managers and Certification Regime in authorised firms involved in the CBILS scheme. These are individuals who are covered by the FCA’s individual conduct rules in COCON. So, for assessments of creditworthiness and affordability, we will regard individuals’ compliance with relevant requirements of CBILS as compliance with their obligations under COCON 2.1 and 2.2 (with the exception of 2.1.1, 2.1.3 and 2.2.4). We intend to give similar clarity on the BBL scheme when it is formally launched.
Managing financial crime
Ensuring that firms manage the risks of fraud and money laundering is essential to a well-functioning financial services system. We recognise that, currently, the need to manage these risks should be balanced against the need for the fast and efficient release of funds to businesses under the Government’s schemes. So, for existing customers, we consider, in the specific circumstances of the current environment, where an authorised firm has carried out appropriate Customer Due Diligence (CDD) before it received an application under the schemes, it does not need to make further checks. However, if an authorised firm has information – including any relevant flags or alerts – suggesting a customer poses a higher risk, for example, of fraud, money laundering, or terrorist financing, it should carry out additional checks.
The financial crime risks may be significantly higher for new customers and authorised firms should carry out the normal CDD process in accordance with the Money Laundering Regulations. However, if the money laundering and terrorist financing risks associated with the new business relationship are low, an authorised firm may decide simplified due diligence is appropriate. Authorised firms can also consider alternative verification methods as outlined in our recent Dear CEO letter to firms providing services to retail investors.