The FSA is dead, long live the King
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The big surprise for the mortgage industry at last night’s Mansion House speech by the chancellor of the exchequer was that there would be no cap on LTVs.
On a day when speculation had been rife that there could be a cap as low as 75% many in the industry will be breathing a sigh of relief it was not discussed.
But the chancellor George Osborne did take some fairly drastic action by ending the decade-old tripartite system of regulation to be replaced with the so-called two peaks system.
The new system gives the Bank of England extraordinary power and responsibilty over economic stability and micro-regulation of the industry.
But before any brokers get too excited about the demise of the Financial Services Authority it is worth noting that there may be a new system but the faces will remain the
same.
Hector Sants will be the first-ever deputy governor of the central bank and you can be pretty sure that a large number of FSA staff will be working for the new bodies.
The real test of any new regulatory regime to is to avoid the mistakes of the past and pre-empt the mistakes of the future.
It’s impossible to say whether the new system will be strong enough to deal with any future problems. But one thing the two peaks system does do is provide more direct accountability for regulatory failures.
During the financial crisis it was hard to know who to blame when things went wrong because regulatory responsibilty was split three ways. But now the buck stops very firmly with the Bank’s governor Mervyn King and, as always, the chancellor.
He may be delighted with his new powers now but King must know that it is on his shoulders the axe will fall if there are any future failures.
