UK regulator vigilant after First Brands, Tricolor collapse

FCA monitors impact of First Brands and Tricolor collapses

Banks like Jefferies and UBS were exposed to First Brands’ $10 billion debt

FCA says it has powerful tools to prevent future misselling scandals

By Kirstin Ridley and Phoebe Seers

LONDON, Oct 9 (Reuters) – Britain’s financial regulator said on Thursday it was monitoring the effects of the collapse of U.S. auto parts maker First Brands, describing it and another recent collapse as “interesting case studies” for private market failures.

First Brands and subprime auto lender Tricolor filed for bankruptcy protection in recent weeks, shaking up parts of the U.S. credit market and triggering questions about risks in the less regulated private credit market where companies have borrowed heavily in recent years. Jefferies and Switzerland’s UBS are among banks with exposure to First Brands, which lists more than $10 billion in debt.

Simon Walls, chief markets officer at the Financial Conduct Authority, said the regulator remained vigilant but it was too early to tell whether there would be a series of failures.

“We don’t know at this stage whether these are idiosyncratic or whether there will be issues with underwriting certain concentrated markets,” he told reporters after the regulator’s annual public meeting.

MISSALES SCANDALS ‘COULD BE PREVENTED’, FCA says The annual meeting comes two days after the FCA published a consultation paper estimating that the country’s automotive finance industry could pay around 11 billion pounds ($14.7 billion) to recoup consumers’ mis-sold car loans.

The FCA said it had a “powerful tool” to prevent the abuse at the heart of the scandal as the industry prepared to respond to plans for a remediation plan for one of the costliest consumer scandals to hit British finance.

Nikhil Rathi, the FCA’s chief executive, said the protracted scandal, which led to a series of lawsuits, a Supreme Court ruling and a proposed compensation scheme since 2007, was unlikely to happen again.

“We don’t see anything like this on the radar, and the consumer tax has given us a very powerful tool to prevent this in the future,” Rathi said at the annual public meeting. he said.

FCA consumer protection rules were introduced in 2023, requiring FCA-regulated firms to put customers’ interests first in a bid to draw a line against mis-selling scandals.

The FCA claimed the remediation plan would cover unfair car loans between 2007 and 2024, costing the motor finance industry around £8.2bn, with estimated operating costs of £2.8bn.

($1 = 0.7487 pounds) (Reporting by Kirstin Ridley and Phoebe Seers in London; Editing by Tommy Reggiori Wilkes and Matthew Lewis)