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The Treasury Committee publishes correspondence between Rt Hon. Andrew Tyrie MP, Chairman of the Treasury Committee, and Tracey McDermott, Chief Executive of the Financial Conduct Authority, on pawnbrokers being denied access to banking.
- Letter from Rt Hon Andrew Tyrie MP to Tracey McDermott, Chief Executive, Financial Conduct Authority, 4 December 2015 (
PDF 289 KB) - Letter from Tracey McDermott, Chief Executive, Financial Conduct Authority to Rt Hon Andrew Tyrie MP, 18 January 2016 ( PDF 831 KB)
- Treasury Committee
Chair's comments
Commenting on the correspondence, Mr Tyrie said:
"A growing number of individuals, firms and charities are being denied access to banking. Banks are reducing their exposure to risk – financial and reputational - in response to anti-money laundering rules. Some of this de-risking is damaging small businesses and making life difficult for thousands of individuals.
Some de-risking is likely to be merited. But the consequences of some of it is now coming with an economic cost, consumer detriment and some hardship and unfairness. Many consumers on the wrong end of de-risking include the low paid, some of whom rely on money services businesses for their banking needs.
Businesses, including pawnbrokers, say that the closure of their accounts prevents them from competing with banks in the provision of financial services, such as foreign currency exchange. The regulator is now examining this aspect of the consequences of de-risking as part of a review of businesses denied access to banking. This has a good deal of merit. The Committee will want to examine the regulators’ work closely when it is published."
Background
On 4 December 2015, Mr Tyrie wrote to Ms McDermott ( PDF 289 KB), asking for the following:
"It is held by the National Pawnbroker’s Association that the closure of pawnbrokers’ current accounts will reduce credit availability for consumers and also reduce competition in the provision of financial services, including short term loans. I would be grateful for your comments."
On 18 January 2016, Ms McDermott responded ( PDF 831 KB), highlighting that:
"We [the FCA] have commissioned an external consultant to research the issue of businesses being denied access to banking. Whilst this work looks further than just pawnbroking, it will consider the nature, scale and drivers of the issue."
FCA Business Plan 2016/17
On the subject of Financial Crime and Anti-Money Laundering, the FCA has identified the following risks in its Business Plan 2016/17:
- In the search for profit and growth, firms may change the risk criteria they use to assess new clients leading to weaker checks and controls.
- Higher costs and falling profits may cause firms to cut investment in systems and controls. The growth of digital tools increases the risk of online financial crime and cyber-attacks.
- Financial crime requirements, together with a range of other factors, including reduced profitability, may cause banks to de-risk their product ranges inappropriately. This may restrict access to financial services to whole groups of individuals or businesses.
- Consumers may become more vulnerable to fraudsters. Pension reforms create a new market for scammers.
It is taking the following action to mitigate these risks:
- Proportionate and effective response to de-risking
- We know that de-risking by banks is causing problems for some groups of consumers. While we do not control this process, we are undertaking work to help address the issue.
- We will complete our de-risking impact assessment in Q1 2016, giving us a clearer picture of the nature, scale and drivers of de-risking. We will work with Government, firms and others to create a proportionate strategic response. We will also carry out work looking at how new technology can make AML processes more efficient, reduce financial exclusion, make it less onerous for customers and encourage easier switching between financial services providers.
Further information
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