Addressing the challenges of post-pandemic debt management in the consumer and SME Sectors: a proposal for the roles of UK financial regulators

Iris Hse-Yu Chiu, Andreas Kokkinis, Andrea Miglionico

Research output: Contribution to journalArticlepeer-review

Abstract

Regulatory actions for short-term debt-relief during the Covid-19 pandemic are facilitating a significant level of indebtedness. We argue that regulators, in leaving the banking sector to manage small business and consumer debtors in ‘tailored arrangements’, risk allowing financial welfare goals to be unmet. Financial welfare goals are important to the Financial Conduct Authority’s (FCA) consumer protection objective and give substantive meaning to the long-term financial stability objective of the Prudential Regulation Authority (PRA). Although the struggles with debt on the part of small and medium-sized businesses and households are not capable of complete resolution by financial regulators, who are constrained by their statutory mandates, we argue that the PRA and FCA should establish a coordinated supervisory framework of ‘tailored supervision’ for banks’ ‘tailored arrangements’ with their debtors. This proposal allows both regulators to address to an extent the needs of unsophisticated post-pandemic debtors and meet their objectives in a joined-up and holistic manner.
Original languageEnglish
Number of pages19
JournalJournal of Banking Regulation
Early online date26 Oct 2021
DOIs
Publication statusE-pub ahead of print - 26 Oct 2021

Keywords

  • Bank regulation
  • Prudential regulation
  • Consumer debt
  • Covid-19 pandemic
  • Consumer protection
  • Tailored arrangements

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