MMR capital rules are non-banks' death knell
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PETER WILLIAMS, PROPOSALS ARE TOO RESTRICTIVE
The Financial Services Authority could kill off non-bank lenders if it makes them hold the same amount of capital as banks, mortgage trade bodies have warned.
The Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association have joined forces to oppose the FSA’s plans to make non-deposit lenders hold the same capital as banks.
In a joint submission to the FSA’s Mortgage Market Review consultation paper on responsible lending, the IMLA and the CML warn that imposing onerous rules on non-deposit-takers could force them to leave the market and damage competition.
Banks currently comply with regulations in BIPRU - the prudential source-book for banks, building societies and investment firms.
Non-banks comply with a simpler set of requirements, MIPRU - the prudential sourcebook for mortgage and home finance firms.
The trade bodies argue that the FSA’s analysis of the non-bank sector does not accurately reflect the reality of the market, for exam-ple, that the activities of nonbanks encouraged the mainstream bank-ing sector to undertake high-risk lending.
Peter Williams, executive director of IMLA, says: “We recognise non-banks need to be adequately capitalised, but forcing them to operate under the same capital requirements as banks is overly restrictive and could make it uneconomical for some non-bank lenders to operate.”
Michael Coogan, director-general of the CML, says: “Non-banks could play an im-portant role in helping rebuild competitiveness in a mortgage market in which lending has become concentrated in the hands of a few large banks and building societies.”
A report from the New Economics Foundation last week suggested British banks may need a second bailout to plug the funding gap that the Bank of England’s Special Liquidity Scheme will leave when it ends in 2012.
In its report, Where Did Our Money Go?, the think tank says that despite at least £1.2 trillion of taxpayers’ money being put at risk to bail out the banking system, many of the major high street banks may ask for another handout from the public purse in 2011.
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