Stricter regulation is the way to avoid problems in future

If the FSA expected an easy ride following the publication of its MMR proposals it must have been sorely disappointed.

While it might have anticipated some strong words on extending its approved persons regime – which might explain its underestimation of 20,000 affected individuals – I wonder whether in today’s environment it expected such a negative response to its plans for greater income verification and a ban on self-cert deals.

The Council of Mortgage Lenders, the Building Societies Association and the Association of Mortgage Intermediaries are all up in arms on the subject of non-verified income but have any of them taken a long-term view?

When economic conditions improve and confidence returns to the market it’s inevitable that lending criteria will be relaxed.

The partly nationalised banks will expand lending to pave the way for a return to private ownership, overseas banks may come back and well capitalised players will defend their market share.

Without robust controls on lending – and that might mean product regulation – I doubt the mistakes of the past will weigh heavily on the decision makers of the future.

It’s a sad fact that light touch and principles-based regulation has failed. A wrong turn now could be the first step towards the next systemic failure.