FSA poised to oppose EC proposals on integration

The Financial Services Authority has indicated it is unlikely to respond favourably to the European Commission’s proposals on mortgage credit.

The regulator will issue its response along with the Bank of England and the Treasury before the consultation deadline of November 30.

The proposals, published in July, examine the case for EC action in the European mortgage credit market, supported by an EC-funded study on the costs and benefits of integration. The study found the benefits of integration would not be evenly shared between member states and the UK would be least likely to benefit.

In its International Regulatory Outlook published last week, the FSA says more detailed analysis is needed.

It also says that while there may be benefits from more integrated markets there may also be “linguistic, cultural and legal issues as well as regulatory ones that limit such integration.”

It adds: “Without clear evidence on this basis, the case for intervention has not been made.”

David Miles, managing director of Morgan Stanley, agrees: “The report doesn’t make the case for EU action. There is a view the European mortgage market is not integrated but the best measure of this is to compare prices between countries. Research shows differences are limited suggesting the market is actually integrated in the sense that matters most to consumers.”

Miles warns that forcing an integrated market could be damaging and adds: “The Commission must keep in mind that what matters is efficiency rather than some notion of integration as an end in itself.”

The Council of Mortgage Lenders’ response, published on November 18, also criticises the study and says: “The Commission does not, at this stage, have sufficient evidence in the report to justify further legislative action.”