UK regulator vigilant after First Brands, Tricolor collapse

By Kirstin Ridley and Phoebe Seers

LONDON (Reuters) -Britain's financial regulator said on Thursday it was monitoring the fallout from the collapse of U.S. auto parts maker First Brands, calling it and another recent bankruptcy "interesting case studies" for private market failures.  

First Brands and subprime auto lender Tricolor have filed for bankruptcy protection in recent weeks, rattling 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 the banks exposed to First Brands, which listed more than $10 billion in liabilities.

The Financial Conduct Authority's Simon Walls, executive director of markets, said the regulator was remaining vigilant but that it was too soon to say whether there would be a cascade of failures.

"We don't know at this stage if they were idiosyncratic or whether there will be issues with underwriting those particular markets that are concentrated," he told reporters after the regulator's annual public meeting.

FCA 'CAN PREVENT' MIS-SELLING SCANDALS

The annual meeting was held two days after the FCA published a consultation document that estimated the country's motor finance industry could pay about 11 billion pounds ($14.7 billion) to compensate consumers for mis-sold car loans.     As the industry prepares to respond to the plans for a redress scheme for one of the costliest consumer scandals to hit British finance, the FCA said it had a "powerful tool" to prevent the misconduct that lay at the heart of the scandal.

Nikhil Rathi, the FCA's chief executive, said the drawn-out scandal - which has led to a wave of court cases, a Supreme Court ruling and a proposed compensation scheme dating back to 2007 - was unlikely to happen again.

"We don't see anything like this on the radar and the consumer duty has given us a very powerful tool to prevent this in the future," Rathi told the annual public meeting.

The FCA's consumer protection rules, which require FCA-regulated firms to put the interests of customers first in a bid to draw a line under cases of mis-selling scandals, were introduced in 2023.

The FCA has proposed that the redress scheme would cover unfair car loans between 2007 and 2024 and would cost the motor finance industry around 8.2 billion pounds, alongside estimated operational costs of 2.8 billion pounds.

($1 = 0.7487 pound)

(Reporting by Kirstin Ridley and Phoebe Seers in London; Editing by Tommy Reggiori Wilkes and Matthew Lewis)