The surveys were delivered to solo-regulated firms to inform the conduct regulator of the pandemic’s impact on firms’ financial resilience.
Results revealed that between February (pre-lockdown) and May/June (during the impact of the first lockdown), firms across the sectors experienced significant change in their total amount of liquidity.
Wholesale Financial Markets (83%), Retail Lending (8%) and Retail Investments (8%) were the three sectors which saw an increase in liquidity between both reporting periods.
Sheldon Mills, the FCA’S executive director of Consumers and Competition, said: “We are in an unprecedented – and rapidly evolving – situation. This survey is one of the ways we are continuing to monitor the potential impact of coronavirus on firms. A market downturn driven by the pandemic risks significant numbers of firms failing.
“At the end of October we’ve identified there are 4,000 financial services firms with low financial resilience and at heightened risk of failure, though many will be able to bolster their resilience as and when economic conditions improve.”
He added: “These are predominantly small and medium sized firms and approximately 30% have the potential to cause harm in failure. Our role isn’t to prevent firms failing. But where they do, we work to ensure this happens in an orderly way.
“By getting early visibility of potential financial distress in firms we can intervene faster so that risks are managed and consumers are adequately protected.”