FCA offers new guidance after UK government updates the Coronavirus Business Interruption Loan Scheme and announces the new Bounce Back Loan

From: RegTech Analyst

The British government has amended its initiatives to help companies survive the global COVID-19 pandemic. Now, the country’s top financial markets watchdog has offered guidance as to what this will be regulated.

Earlier this week, the Treasury updated the Coronavirus Business Interruption Loan Scheme (CBILS) and unveiled a new Bounce Back Loan (BBL) initiative to support British businesses through the crisis.

CBILS was officially launched at the end of March just as the country went into lockdown. Yet, as the crisis has worsened and many businesses have struggled to be approved for a loan. This is something that the Treasury aimed to make easier with the new changes, which meant businesses will no longer need to provide things like financial forecasts.

The leading UK lenders welcomed the move. In a joint statement Matt Hammerstein, CEO of Barclays Bank UK; Kevin Kingston, CEO of Danske Bank; Amanda Murphy, head of commercial banking at HSBC UK; David Oldfield, group director and CEO of commercial banking at Lloyds Banking Group; Paul Thwaite, CEO of commercial banking at the NatWest Group; Nathan Bostock, CEO of Santander UK; David Duffy, CEO of Virgin Money UK; and Stephen Jones CEO of UK Finance said, “The reforms to CBILS announced by the British Business Bank and HM Treasury with the support of the regulators provide welcome changes that should enable banks to provide finance to businesses more quickly alongside other forms of support including capital repayment holidays.”

They added, “Following the changes to the scheme announced today lenders will only ask businesses for information and data they might reasonably be able to provide at speed and we will not require the provision of forward-looking financial information or business plans from businesses applying for CBILS-backed lending, relying instead on our own information to assess credit and business viability. Frontline staff have been working tirelessly to get money to those viable businesses that need help and we stand ready to support many more customers in the weeks ahead.”

The BBL scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000. The scheme will launch on May 4. The government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. Loan terms will be up to six years. No repayments will be due during the first 12 months.

On the back of these announcement, the Financial Conduct Authority (FCA) made a statement as to how it would regulate the changes.

“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,” the regulator said. “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.”

The FCA also clarified relevant individuals under the Senior Managers and Certification Regime (SM&CR) scheme,  that under CBILS these “are individuals who are covered by the FCA’s individual conduct rules in COCON.” This means that “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.”

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