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Lenders must fight their corner

Phillip Tebbatt says politically motivated measures to address problems in the lending market could do more harm than good and the industry fightback should start here

Was I alone in thinking that it was a rather cheap shot by the Treasury Select Committee to get a group of apologetic bankers (not, dear reader, rhyming slang) to admit to not having a formal banking qualification between them?

I could not help but wonder what qualifications the committee – or MPs generally – have to run the country. I have a sneaking suspicion that many of them would have problems running a bath.

But the political climate is clearly not one that allows those unfortunate bankers to make such an obvious point. No, the mood to adopt is one of contrition. The not-so fantastic four appear to have been forced into apologising for everything from slavery, the outbreak of World War II and – I’m pretty sure I heard this mentioned – the mighty Leicester City FC never having won the FA Cup.

They even had to apologise for some stuff that may have been their fault. We live in strange times.

However, the effect is likely to be an emboldened regulator that will feel able to catch the prevailing mood and bring in a raft of measures designed to counter perceived problems in the lending market.

The Financial Services Authority’s recently published business plan for 2009/10 suggests that this will be the case. Rather than be left alone to lick its wounds the industry is going to be faced with a multitude of measures designed to address the latest problems. One cannot help but note that the FSA has not apologised for not having done these things before.

The business plan is well worth professionals taking a good look at – in fact, the matrix setting out the timetable for action should be pinned up on many a wall.

I have no idea when the plan was finalised and, in particular, whether it was changed in any way to take into account the Treasury Select Committee hearings.

But it can hardly be a coincidence that one of the matters on the agenda is the suggestion that the FSA will “step up [its] efforts to ensure that individuals working in key roles in firms remain competent to do so. A key focus in 2009/10 will be on the competence of Significant Influence Functions individuals, especially in high-impact firms.”

It seems that chief executives and board members the length and breadth of the land will be scurrying off to complete their CeMAPs.

We are also cautioned to expect some discussion and consultation papers on banking regulation, liquidity reporting regimes, Financial Services Compensation Scheme reform, protection of clients’ assets, capital requirements and a range of other matters, most of which revolve around some fairly obvious and well worn themes.

And there is to be further work on remuneration policies. Whether financial services is to become part of the voluntary sector remains to be seen but there seems to be rather more sackcloth and ashes being donned about how professionals are rewarded than is appropriate. After all, the government was happy enough to take tax revenues in the good times.

The other message that comes through loud and clear – although doubts remain as to the extent to which the mortgage market will be affected by this – is that the Retail Distribution Review is still very much on the agenda. In Q2 2009 it is intended to consult on the latest evolution of the regulator’s proposals in this regard, with the policy statement containing the detailed rules appearing in Q1 2010. My concern is that amid all the self-flagellation there will be a reluctance to engage in a critical way with many of the pronouncements coming out of the FSA and the Treasury.

This could end up being a disaster which results in the regulatory equivalent of the Dangerous Dogs Act.

Yes, some stuff that happened over recent years should not have. But let’s please remember that some good things also happened for which lenders should not apologise – and, indeed, of which the industry should be proud.

I realise I may be flying in the face of the zeitgeist but perhaps the fightback should start here.

Philip Tebbatt is principal of niche financial services law firm Slater Rhodes and can be contacted at


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