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CML warns of confusion over future regulation

The Council of Mortgage Lenders has warned that separate debates about the future shape of mortgage regulation in both Europe and the UK could lead to confusion.


In its latest issue of News and Views, the association says the proposals by the Financial Services Authority and the European Commission are being developed in tandem, which creates the risk of conflict.

The FSA is now working towards its discussion paper in September setting out its proposals for the future regulation of mortgages in the UK.

Meanwhile, regulators in Europe are working to a similar timetable, and will be publishing their own proposals for legislative intervention later this year.

Last month, the European Commission published a high-level communication for the spring European Council with a comprehensive action plan to “clean up financial markets.” It wants to move quickly, with plans to present a financial supervision package before the end of May, action to fill regulatory gaps on a “safety first” approach, and measures on “responsible lending and borrowing” in the autumn.

The CML says the onset of the credit crunch and banking crisis initially led the Commission hold back its plans for a white paper on mortgages.

But now, it seems certain that the Commission will no longer accept that markets will deliver the right outcome for consumers without some form of cross-border regulatory intervention, based on its initial response to the credit crunch.

The Commission has been pursuing a comprehensive series of studies and impact assessments of various aspects of the market, including, credit intermediaries, equity release products, tying-in, and its impact of customer mobility, interest rate restrictions, responsible lending and non-credit institutions.

In addition, it has been carrying out a series of cost-benefit analyses of some of the policy options. The outcome of all this work will be distilled into a series of proposals to meet the Commission’s timetable for action.

The CML says there is an opportunity in the coming months to help the Commission strike the right balance between measures that would work on a global or European level and those that would not, and to try to avoid a clash between regulation at a European and national level.

It agrees with the EMF’s view that the industry should work with the Commission to try to help it identify positive and concrete measures that would benefit both consumers and firms, promote integration of European markets and underpin consumer protection where this is necessary.

The EMF argues that the best way forward is for the industry across Europe to propose a robust Framework for Responsible Lending Principles. The CML says this should be firmly rooted in best practice as it currently exists across Europe.

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