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Principles-based regime could spur consolidation

Nearly half of all intermediaries believe the move to principles-based regulation will lead to consolidation in the broker market.

In the latest census from the Association of Mortgage Intermediaries, 44% of members say they think principles-based regulation will lead to consolidation, with more firms moving into networks and more advisers joining larger firms.

In contrast, 19% of members feel this will not happen and some 36% don’t know.

Rob Griffiths, associate director of AMI, says: “With the move to principles-based regulation firms may look for guidance from third parties when it comes to complying with the changing regime.  

“This guidance could come from various sources such as AMI, compliance consultancies, the press or networks and larger firms. As a consequence we could see more firms turning to larger players for help and this could eventually lead to market consolidation.”

He adds: “The large number of ‘don’t knows’ reflects broker uncertainty about the regulator’s intentions in this area.”

AMI’s July census also reveals that 39% of members believe regulation based on prin- ciples will improve things for all firms while 6% believe the move will improve things for small firms only and 14% think it will only make things better for larger firms. Some 41% of respondents don’t think it will improve things for any firms.

A majority of 57% believe the regulatory shift of emphasis will bring greater uncertainty over what is and is not compliant, compared with 22% who believe it will give firms more flexibility to decide how to meet the standards of the Financial Services Authority.

Griffiths adds: “The move to a principles-based regulatory regime will have a big impact on the financial services industry.

“The full scope of that change has yet to be seen and it’s clear from our survey that there is uncertainty among mortgage intermediaries about principles-based regulation and the challenges and benefits it will bring.”


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