The Financial Conduct Authority (FCA) has warned shadow banks to ensure customer funds are secure or face potential closure, according to the Daily Telegraph citing a letter to nearly 300 CEOs.
It instructed these businesses, which provide deposit and transfer services without a banking licence, to increase their financial reserves, address potential money laundering, and maintain appropriate management in accordance with their size and complexity.
While a source close to the FCA told the newspaper the warning is consistent with its long-term priorities, the intervention comes amidst efforts to prevent a global banking crisis.
The FCA's Matthew Long expressed concerns about inadequate controls in many payment firms, which could pose a risk to customers and financial system integrity.
Silicon Valley Bank's recent failure has sparked concerns about other lenders, with Credit Suisse seeking emergency funding from the Swiss central bank. Shares in the troubled Swiss lender recovered following the emergency loan announcement, but its long-term future remains uncertain.