The FCA’s deputy chief executive Sarah Pritchard has said regulating non-bank leverage is “a particularly tricky issue to tackle”, adding that it’s crucial the regulator collaborates with its international counterparts to manage risks.
Pritchard’s comments follow the publication of the FSB’s policy recommendations to identify and address financial stability risks created by non-bank leverage.
In an article looking at the FCA’s implementation priorities for the UK, published by the watchdog yesterday (11 August), Pritchard – who is also co-chair of the Financial Stability Board's working group on non-bank leverage – addressed the importance of collecting data and ditching less relevant regulatory reporting requirements.
“Effective risk management depends on having the right information at the right time. Without it, both market participants and regulators are essentially flying blind,” Pritchard said.
“The FSB recommendations are well timed for us. We are already taking steps to evaluate what data we need and switching off regulatory reporting returns that are no longer relevant.
“We’ll think carefully about which risk metrics are most useful for us going forward, including how we can align with other jurisdictions.”
Working with international partners will be paramount, Pritchard added.
“As much of the non-bank sector operates across borders, it’s crucial that we also collaborate with our international counterparts to spot risks and potential spillovers effectively.”
“This means engaging bilaterally on issues like information sharing and risk monitoring, while continuing to take an active role in international standard-setting bodies.
“In this way, we can strive for internationally consistent outcomes and be confident that we’re safeguarding the system, while still ensuring that the UK remains competitive.”
