FSA fails because it doesn't understand the fundamentals
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For me the fundamental principle of regulation is that you can’t regulate what you don’t understand, and the FSA proved this when regulated mortgage contracts came into being.
The fact that we now have to fell a forest to produce a mortgage offer has made not a jot of difference to the way the market behaves.
The fact is that a mass of bureaucrats thought the market could be regulated by process and forgot we have to lend to real people in the real world.
The problem is that the FSA features a bureaucracy that hides behind an incomprehensible and unworkable handbook. This is a laugh because the book is enormous and the regulator can’t even offer clarification on some aspects of its own document.
For example, ask it to define responsible lending and the answer is more or less - we’ll let you know when you get it wrong.
I believe regulation is necessary but the FSA has to understand the business it is involved with and should be headhunting experts rather than taking on economics graduates straight from university.
I wonder how many people in the FSA have actually mandated a mortgage, interviewed an applicant or dealt face-to-face with an arrears case.
I know from three decades of experience that you can’t parcel borrowers into cubby holes but that’s what the regulator does.
GREY-HAIRED UNDERWRITER
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