New research prompts CML to urge FSA to announce responsible lending reconsultation
Published: 4 November 2010
At the launch today of two major pieces of independent research on the potential impact of the FSA’s responsible lending proposals, CML director general Michael Coogan called on the FSA to make an early announcement before the consultation deadline of 16 November that it will reconsult on a new draft of responsible lending rules, with a full and complete impact analysis.
Such an announcement would enable respondents to the consultation to respond far more constructively and to forge a path with the regulator to achieving the right regulatory outcomes, in the knowledge that the FSA is listening to the evidence, and aware that the rules as currently drafted are well-intentioned, but flawed and impractical.
The two new sets of research findings, by economic research consultancy Oxera and by economic and social research consultancy Policis, have been funded by the CML but are independent in their assessments. They, along with the other evidence produced by the CML itself, should give the FSA pause for thought as they bring together a wide range of evidence that suggests there would be a range of negative, unintended outcomes from the implementation of the FSA’s policy and proposed rules as currently drafted.
Michael Coogan reflected:
“The FSA, like the industry, needs to have a clear steer from the coalition government about what type of regulatory structure is needed to support housing policy and deliver systemic stability in the mortgage market in the 21st Century… Before we go much further on the MMR, or the restructuring of regulatory bodies, we need Ministers to be clear about their intentions. Whether they want regulation to protect the vulnerable minority, or give an opportunity to the majority to achieve their aspirations. They can do both by allowing free access to the market to responsible borrowers, but establishing an effective safety net for the few who have difficulties due to changes in their lives. This is not the approach which the FSA has taken due to its limited focus on its conduct risk strategy.
“When we know what the government wants the regulator to achieve, we and FSA officials will be in a better position to deliver the sustainable market for all participants which is flexible for consumers. These two outcomes reflect a shared vision by the FSA and lending industry. The CP proposals have blurred that vision to a point where neither outcome will be delivered by CP 10/16 as drafted. If you agree, write to the FSA, your local MP and relevant Ministers.”
Notes to editors
1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 94% of all residential mortgage lending in the UK. There are 11.4 million mortgages in the UK, with loans worth over £1.2 trillion.
2. The two pieces of independent research are Compliance analysis of the FSA’s proposed income verification and affordability assessment rules in the mortgage market review (MMR) by Oxera and Consumer and market impacts of the FSA’s mortgage market review (MMR) by Policis.