• Firms having to wait 97 days for permission to expand
• Stifles competition and costs customers

The length of time it takes the FSA to grant financial services firms permission to expand their businesses has increased by another 10% in the last year, says City law firm RPC (Reynolds Porter Chamberlain LLP).

The average number of days for the FSA to approve a regulated firm’s expansion plans (called a “variation of permission”) is up to 97 days this year (to June 30 2011), from 88 days during the same period last year. The time taken to gain FSA approval has more than trebled over the past four years from 25 days in 2008 to 97 days in 2011.* (see graph and explanation below)

RPC explains that a business needs to apply for a variation of permission if it wants to:

•  Start a new line of business
• Undertake a new regulated activity
• Extend a business line into a new product or to a new class of customer

Jonathan Davies, Regulatory Partner at RPC, says: “The FSA’s remit is to ensure that a company’s business plan will not pose a significant threat to the stability of the markets or put consumers at risk.

“However, these new figures seem to show that the FSA’s checking process is becoming more laborious than ever before.”

“The financial services sector is a key employer and vital generator of tax revenue. If the FSA’s intrusive approach is applied indiscriminately and prevents well run, stable businesses from expanding, it damages competition and both the consumer and the economy will suffer.”

RPC explains that the FSA is required by statute to be aware of the effect of its activities on competition in the financial services sector.  The FSA itself states that this requirement is set to avoid “unnecessary regulatory barriers to entry or business expansion.”

The FSA states that it aims to process the vast majority of applications within three months.

Jonathan Davies says: “Our clients are telling us that the FSA is dragging its heels on approving business plans for even routine expansions. Clearly they are failing to strike the right balance between effective regulation and allowing growth.”

“The worry is that if the FSA continues to subject every firm to such intrusive and lengthy checks, new competitors may be dissuaded from entering the market or even trying to establish new product lines. This could impede the financial service sector’s economic recovery. ”

Average number of days for the FSA to grant permission to businesses to vary their activity

_{* FSA, released to RPC under a Freedom of Information Act request}

ENDS

Press enquiries:

Jonathan Davies, Partner
Reynolds Porter Chamberlain LLP
Tel: +44(0)20 030 6466

Nick Mattison or Toto Reissland
Mattison Public Relations
Tel: +44(0)20 7645 3636