According to City law firm Reynolds Porter Chamberlain LLP (RPC), authorisations took an average of 7.9 weeks pre-2007 and businesses are waiting 167% longer for authorisation.
Jonathan Davies, regulatory partner at RPC, said: “The question in my mind is whether the FSA is taking longer to authorise firms because it is being more rigorous or whether it is because it is haemorrhaging its more experienced staff and cannot keep up with the workload.”
He added: “If, on the other hand, the FSA lacks the resources to cope effectively with requests for authorisation then that will raise major concerns in the financial services sector.”
An FSA spokesperson responded that resources were not a problem and its head count had increased three-fold year-on-year.
“We’ve absolutely increased the level of our scrutiny since the credit crunch hit and that’s been well-publicised. Timescales have also lengthened, for example, because cases are more complex and many applicants submit inaccurate applications.”
The FSA also denied it was haemorrhaghing staff and said RPC was entitled to do its Freedom of Information request but that the regulator had never hidden them and published its performance standards figures on its website.
For example, it said from 1 October 2009 to 31 March 2010 98.9% of applications were completed within 6 or 12 months of receipt.
The FSA received 1,375 authorisation applications between April 1 2008 and March 31 2009 at the height of the credit crunch, 37% less than at the height of the boom when it received 2,193 applications in 2006-7.
Jonathan Davies said: “Fewer financial service businesses have been trying to enter the market since the credit crunch started so it is even more astonishing that FSA authorisations are taking so long.”
“These delays risk reducing competition and harming the City’s international competitiveness. Is the legacy of the credit crunch really going to be that consumers suffer because of a lack of competition between financial service providers?”
Jonathan Davies points out that it is still unclear how the authorisation process will work once the FSA’s role is split between the new Bank of England arm – which will oversee prudential regulation of banks and insurers – and the new Consumer Protection and Markets Authority.
