Financial service start-ups are facing record wait times for FSA approval, with the average wait now reaching 22.9 weeks, according to data obtained by City law firm Reynolds Porter Chamberlain.

The length of time firms must currently wait for approval is nine per cent longer than the previous record peak, 21.1 weeks, in Q2 2010. RPC says that approval times are taking longer because the FSA is scrutinising a much higher proportion of start-ups’ business plans than ever before.

According to RPC, approval times are also stalling because of the internal 'twin peaks' shake-up of the FSA, which has seen the organisation internally divided along the same lines that will operate when the FSA is formally broken up next year.

The City law firm is concerned that the FSA is shifting too far away from its original function by discouraging viable new enterprises with long wait times, thereby stifling competition.

Richard Burger, regulatory partner at RPC, comments: “The FSA is undergoing a major overhaul and it looks like the reorganisation is having an effect on the organisation’s ability to process approval applications. The current wait times could be putting a real brake on UK innovation.”

“The time taken for approval can put off firms seeking approval, and this risks stifling competition in the market. The concern is that this will worsen once the two new regulators are in place, as systemically important financial services businesses will need approval from both of them.”

“This overlapping period is an opportunity for them to overhaul the process of approval, rather than simply follow the mould of its predecessor.”

RPC says that the FSA is scrutinising a much higher proportion of financial services start-ups’ business plans before granting them approval, contributing to much longer wait times.

Says Burger: “Fewer applicant financial services firms would face line-by-line scrutiny of their business plans in the past, but that is now quite common. It’s a time-consuming process so it means that firms take a lot longer to get up and running.”

Share Story: