Information on the Future Fund Programme admistered by the British Business Bank - August 2021

This is a Freedom of Information request about the Future Fund Programme which is administered by the British Business Bank[1].

Please provide:

• Confirmation as to whether the FCA receives details of which FCA regulated firms have had applications for convertible loans approved by the British Business Bank (BBB) under the Future Fund programme - either from the BBB directly or via the PRA. 
• Details of the number of FCA regulated firms, which the FCA is aware of, which have had applications for convertible loans approved by the BBB under the Future Fund programme (since the programme commenced in May 2020).
• The number of firms which the FCA has written to inform them that convertible loans provided by the BBB under the Future Fund programme do not qualify as regulatory capital under the FCA capital requirements rules.
• Details of the number of firms which have insufficient regulatory capital following receipt of the proceeds of Future Fund convertible loans.
• Copies of correspondence passing between the FCA and BBB concerning the regulatory capital treatment of Future Fund convertible loans.

• Confirmation as to whether the FCA receives details of which FCA regulated firms have had applications for convertible loans approved by the British Business Bank (BBB) under the Future Fund programme - either from the BBB directly or via the PRA.

A single list of firms that were successful in their application and are FCA solo-regulated was provided by the British Business Bank following a direct request by the FCA. 

• Details of the number of FCA regulated firms, which the FCA is aware of, which have had applications for convertible loans approved by the BBB under the Future Fund programme (since the programme commenced in May 2020).

We are aware of 41 authorised firms which have had applications for loans approved.

• The number of firms which the FCA has written to inform them that convertible loans provided by the BBB under the Future Fund programme do not qualify as regulatory capital under the FCA capital requirements rules. 

As of 5 May 2021, the FCA has contacted 29 firms.

• Details of the number of firms which have insufficient regulatory capital following receipt of the proceeds of Future Fund convertible loans.

As of 5 May 2021, we are aware of 9 firms which, absent any mitigating actions taken by the firms (and there are a variety of actions firms may be able to take dependent on the circumstances of each individual firm) would have insufficient regulatory capital if Future Fund convertible loans were excluded from regulatory capital (as we consider should be the case).

• Copies of correspondence passing between the FCA and BBB concerning the regulatory capital treatment of Future Fund convertible loans 

We can confirm that we hold information that falls within the scope of this part of your request.  However, we are unable to disclose it to you as disclosure would, or would be likely to, harm the effective operation of the FCA.  Therefore we consider that section 31 (law enforcement) of FOIA applies.

Furthermore, where disclosure of information would, or would be likely to, prejudice the commercial interests of firms, we are prohibited from disclosing it under section 43 (commercial interests) of FOIA.

Finally, to the extent that the information you have requested is, or contains, confidential information received in the course of carrying out our public function under section 348 of the Financial Services and Markets Act 2000 (FSMA), we are prohibited from disclosing it to you under section 44 (prohibitions on disclosure) of FOIA.

Annex A

General right of access to information held by public authorities

Anyone requesting information from a public authority is entitled to be informed in writing whether it holds the information described (this is under section 1(1)(a) of FOIA).  If the public authority does hold it, the person requesting it is entitled to have the information communicated to them, under section 1(1)(b).  However, there are exclusions and exemptions to these rights.

Section 31 (Law enforcement)

This exemption applies to your request as disclosure would, or would be likely to, harm our function of “ascertaining” or monitoring compliance with our regulatory requirements over time (as opposed to during an ongoing investigation).  This exemption is qualified and we have balanced the public interest for and against disclosure as required by FOIA.

• There is a strong public interest in favour of transparency and in the public being reassured that we are taking all views into consideration and making objective and clear policy decisions.
• Disclosure of the information would demonstrate how we respond to matters arising within the sector we regulate and would enable regulated firms and their senior management to better understand why and how we make decisions on regulatory matters.  This, in turn, will facilitate comments on the FCA’s regulatory and supervisory approach.

Against disclosure

• There is a strong public interest in the FCA being able to carry out its functions in the most effective manner possible.  This includes being afforded the time to consider any consultation responses in full before issuing relevant policy.  Premature disclosure of the information could therefore prejudice any work we may currently be undertaking and could affect the outcome of any such relevant policy.
• Disclosure of the information at this time would, or would be likely to, have an inhibiting effect on any future recommendations made to the FCA Board regarding the formulation of policy.
• In addition, disclosure would, or would be likely to affect the way in which we interact with firms which, in turn, could seriously undermine the FCA’s regulatory function.

Section 43 (Commercial Interests)

This section of FOIA states that we are exempt from providing information if disclosing it would, or would be likely to, prejudice the commercial interests of any person, including the public authority that holds the information.  As this exemption is subject to the public interest test, we have considered relevant factors in favour, and against, disclosing information as required by FOIA.

For disclosure:

• Disclosing the information might provide the public with additional context on the issues under discussion.
• Disclosure could also give consumers information to help them in making decisions about their dealings or potential dealings with firms and individuals that are, or may be, operating in the financial services industry.

Against disclosure:

• Disclosure of the information would, or would be likely to, lead to widespread speculation affecting the brand and reputation of firms in the market in which they operate and without the relevant entities having had the opportunity to comment.
• It is strongly in the public interest that the FCA is able to have open and candid exchanges of information with the firms it regulates, regardless of the commercial sensitivity of the information.  Disclosing the information could lead to them being less willing to cooperate with us in future on similar matters.

On this occasion, and for the reasons set out above, we have concluded that the balance of the public interest is in favour of not disclosing the information.

Section 44 (Prohibitions on Disclosure)

As explained above, section 44(1)(a) of the Act provides that information is exempt from disclosure if this is prohibited by or under any enactment.

Section 348 of FSMA prohibits the disclosure of “confidential information” otherwise than in limited permitted circumstances, none of which apply in the present case.

“Confidential information” is defined in section 348 of FSMA as information which relates to the business or other affairs of any person, which was received by the FCA (or its predecessor the FSA) for the purposes of, or in the discharge of, its functions under FSMA, which is not in the public domain (unless disclosed in breach of section 348), and which is not in the form of a summary or collection of information so framed that it is not possible to ascertain from it information relating to any particular person.

To the extent that the information you requested in point 5 is, or contains, confidential information under this provision, we are unable to provide it to you.  If we disclosed the information without the providers’ consent and the consent of the person/s the information is about, we would breach section 348 of FSMA which is a criminal offence.

Section 44 of the Act is an “absolute” exemption and therefore the public interest test in section 2 of the Act does not apply to the exemption conferred by section 44.