FCA is keeping close eye on systemic risk following private equity fears

The UK’s financial regulator the FCA is continually monitoring for systemic risk in the funds industry, the FCA’s head of asset management & pensions Nike Trost, said today following a warning from the Bank of England earlier this week that high interest rates could cause havoc in the £6.5 trillion private equity industry with dire knock-on effects for the wider economy.

Asked at the inaugural FundsTech Forum conference whether the FCA shares the Bank of England’s concerns over systemic risk in the private equity sector, Trost said that, while the FCA was, as a regulator, more focused on the funds industry than the Bank of England, “this [systemic risk] is something that we are looking at very closely”.

As high interest rates raise the risk of losses for banks and the private equity sector is heavily reliant on debt, regulators are stepping up their scrutiny of private equity markets.

Trost also told the conference, aimed at operating, technology and IT professionals working in the technology funds industry, that the FCA was “tech agnostic” about technology around tokenization and that it is not the purpose of the regulator to be prescriptive about technology adoption.

Trost said that the FCA was “open-minded” about the technology that the industry chooses to use: the regulator’s main concern was making sure that systems were resilient and that data was safe.

“There are real questions around how can changing technology be accommodated by regulation and uncertainty about whether what we have in the framework now might stop people from adopting new technology.”

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