The regulator's new clothes
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The news last Wednesday that the Financial Services Authority will be scrapped by 2012 no doubt brought a cheer from many in the mortgage industry.
Since the FSA assumed responsibility for regulating the mortgage market in 2004 brokers and lenders have had a long list of complaints about it - never able to give a straight answer, rules masked in convoluted legalese and unable to prevent a crisis.
But some comments on Mortgage Strategy Online have been akin to a child finding out that their school has burnt down. The reality is that little will change in the short term, a fact emphasised by Hector Sants staying on to become chief executive of the Bank of England’s new prudential regulator.
The day after chancellor George Osborne handed the FSA its death sentence Sants himself emphasised as much in a speech to the Chartered Institute for Securities & Investment.
Sants argues that there is still evidence of imprudent decisions being made by the management of big firms and as a result “greater intervention is needed from regulators to ensure decisions deliver the outcomes society expects”.
So, it’s out of the FSA frying pan and into the Bank fire.
Meanwhile, a big question mark hangs over whether an LTV cap will be imposed. Despite the rumours Osborne has not yet mentioned this.
he capital requirements imposed on banks are effectively a cap anyway, with three times the amount of capital needed for a 90% LTV product than for a 60% LTV deal. That’s why first-time buyers are an endangered species.
Tightening this further would only make things worse and ensure that for a large part of the population buying a house remains a distant dream.
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