New Scale Up Unit to cut red tape

Chancellor Rachel Reeves has announced more details of the government’s Scale Up Unit designed to offer bespoke support for scaling banks and insurers seeking to navigate rules and regulation and reduce the regulatory burden facing financial services start ups.

The Scale-up Unit will be jointly led by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). The service will open initially for fast-growing deposit-takers and insurers, before expanding to serve other financial services firms including fintechs next year.

She acknowledged that currently “the vast number of rules make life complicated for these businesses. We are helping them cut through the noise, to grow and innovate. That’s how we will boost jobs, boost growth, and build an economy that works for, and rewards, working people.”

Sam Woods, PRA CEO, said:

Nikhil Rathi, FCA Chief Executive said:

The Bank of England’s background briefing said the Scale-up Unit will provide a dedicated point of contact and provide support on topics including:

Capital reviews: the Scale-up Unit will work to facilitate out-of-cycle capital reviews for firms that are rapidly growing, or whose business models have changed significantly;

Regulatory processes: the Scale-up Unit will help firms to understand which regulatory processes would be relevant to their scaling-up plans and to co-ordinate regulator interactions ahead of, and during the process of, formal submission, for example on variation of permission (VoP) applications;

Product innovations: for firms looking to launch a new or innovative product or service, the Scale-up Unit will support an early-stage discussion on these plans and the corresponding regulatory treatment; and

The impact of new policy proposals on Scale-up firms: if there are aspects of new policy which are relevant to, or could impact, scaling-up firms, the Unit will provide a means to facilitate information-sharing for the purposes of the PRA and FCA’s policy-making processes; and

Sector engagement: The Scale-up Unit will support ongoing dialogue between regulators, firms and the wider scale-up eco-system.

The Unit is specifically designed to support firms that are already scaling up within their chosen markets, so to access its services banks and building societies will need to broadly align with the following criteria:

1. Be in scope of PRA/FCA dual regulation – this aspect of the Scale-up Unit is only for firms that are already authorised by both regulators;
2. Have been operating for more than five years, so are not part of the New Banks supervisory approach;
3. Be in a period of sustained growth e.g. income growth of at least 20% over a three year period, and are looking to continue this upward growth trajectory; and
4. Have a genuine need for support from the regulators to scale up and are not already of the size and scale where accessing these resources via other channels would be feasible.

The Bank of England said it expects the service to be of particular interest to firms with a balance sheet in the range of £3bn to £20bn.

The launch was welcomed by Richard Davies, CEO of Allica Bank, who commented:

“The new scale-up unit is a positive step that we have actively called for and welcome. It should enable challengers to further support the real economy – and giving banks like Allica more capital certainty to boost lending to the SMEs that power local economies.”