In a podcast published on the watchdog’s website, Nikhil Rathi who joined the FCA in October said that he “cannot stop” some of the firms that are under FCA oversight from failing.
He continued to say that the FCA is not a “zero-failure regulator’, but he stressed that in those circumstances, the FCA will work to “ensure that risks are managed and consumers are adequately protected”.
The comments come a week after the chief executive told members at a Treasury select committee meeting on 4 November that the FCA is seeing “increasing signs” of distress among small businesses in the financial services sector, including those that are regulated.
At the time Raithi said the group, which regulates 60,000 UK firms had established new “teams and new data analytics tools” to try to analyse and understand which firms are the most risk by looking at their balance sheet data, liquidity and other metrics so they can get a sense of where it sees the biggest risk of failure.
He added: “We are looking, with that work, to understand where the risks are and what steps we can take to make sure that, in the event of failure, the harm to our objectives is minimised, particularly any harm to consumers. We are looking at issues like safeguarding of client money.
“In particular, when a firm fails, unfortunately, there is pressure sometimes to use client money for reasons it should not be used for, so we are watching that kind of issue quite closely.”