Brokers know true meaning of stress

26 July 2010

The results of the stress tests of Europe’s banks were due to be published after the financial markets closed last Friday.

Of course, the 91 banks that have been subjected to the tests will be eager to find out how they have performed.

The point of the tests is to measure the health of up to 65% of the European banking sector and whatever the outcome, it’s likely that governments and taxpayers will be quickly on the case to ensure any perceived systemic or company failings are resolved.

If only such help was on hand for broker businesses. The stresses in these firms are well documented, as brokers are not only exposed to market risk from the demand side but they have also been let down on the supply side as banks have raced to restore their balance sheets at the expense of lending.

And while it is welcome in many ways, regulation comes at a cost too.

Any directly authorised firm will tell you that capital set aside is effectively money taken out of the business. And this is before you consider the cost of implementing regulatory measures and rising regulatory fees.

The financial services industry has long been due an overhaul but economic circumstances have conspired to make life particularly difficult for the broker sector.

So the Mortgage Market Review must be handled sensitively if we are to get through without further casualties. If bankers want to know the true meaning of stress, they should talk to brokers.

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