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FSA accused of fig leaf regulation

The Financial Services Authority has been accused of taking a fig leaf approach to mortgage regulation in its Mortgage Market Review.

In a study by David Steven, a non-resident fellow at New York University’s Centre on International Cooperation and a member of the advisory board for JLT’s World Risk Review.

In his report, Time To Stop Betting the House, he says the FSA’s MMR is of benefit to mortgage lenders, but fails to address consumer concerns.

He says it is taking a fig leaf approach and covering up the failures of the mortgage market.

In the report he says: “The worst, the FSA is guilty of fig leaf regulation. In good times, UK mortgages are among the most profitable in Europe for banks, and the most expensive for borrowers.

“In bad times, the sheer size of housing debt, and the proportion of that debt held at variable rates, has substantial, and growing, potential to cause macroeconomic damage.”

But he says the FSA seems interested in change as much to protect the industry, as it does to protect borrowers and the wider society.

He believes the regulator has lost its focus of protecting consumer needs and is instead more concerned with people not losing faith in the financial services.

The report says the FSA has failed to assess a number of risks that could impact the mortgage market, such as  rising interest and unemployment rates and a further fall in house prices.

It recommends that a Royal Commission should be formed, independent of industry and regulatory interests, to explore the future of the mortgage market.

The study calls for the FSA to only implement proposals in the MMR on a temporary basis and to consider a much broader and far-reaching debate on the future of the market before implementing change.


Analytical disorder grips the market

Evidence of compulsive predictive fallacy syndrome – otherwise known as CPFS – is growing, possibly in response to analysts suffering from post-credit crunch stress disorder (PCCSD). The classic symptom of CPFS is an overwhelming compulsion to produce complicated predictions and forecasts, possibly to compensate for having completely failed to see the credit crunch coming in […]


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  • Dave Espin 1st February 2010 at 1:36 pm

    David Steven is correct in his analysis of the FSA’s proposals in the Mortgage Market Review.
    If any brokers bother to read the document, it is a charter for lenders to keep making massive profits and for intermediaries to be squeezed out once and for all – and damn the customers altogether!
    The regulator plans to ban certain types of borrowers from getting mortgages at all – instead of encouraging a better method of assessing each case on its merits. The effect of the MMR would be to leave many existing borrowers who, for whatever reason are on SVR with a sub-prime lender, unable to remortgage to a high street lender – so they will be at the mercy(?) of those lenders not to be ripped off.
    Anyone who reads the MMR proposals will see that the FSA has learned little from their six years in control and are still in a world of their own.

  • Kay 1st February 2010 at 1:16 pm

    Perhaps we need more “unqualified” people to sort out the mess the “qualified” people have made

  • Evan Owen 1st February 2010 at 12:50 pm

    Dear Mr Severn

    Please don’t comment on regulation, you are not qualified to do so.

    Yours faithfully

    Evan Owen