The proposals had been expected to be published in July but speaking at the FSA’s annual public meeting today, Turner says the reforms need wide ranging debate.
He says: “The more that a regulator seeks to intervene in defence of consumer interest, the more that the regulator is then making crucial trade-off choices on behalf of society, and such trade-offs are never purely technical, but judgemental and political with a small ‘p’.
“Such trade-offs are at the forefront of our work on the MMR, which is designed to address the tail of poor lending, where consumers were sold mortgages with a likelihood of default so high that the lending might reasonably be considered irresponsible.”
He says the crucial social choice is how high is too high.
He adds: “If you knew in advance that mortgage lending to a customer group with specific characteristics had a 15% chance of resulting in arrears and repossessions, is that too high? – when the implication of considering it ‘too high’ is that we will protect the 15% from the trauma of repossession, but at the expense of restricting the freedom of 85% of that customer group to make a stretching but still ultimately affordable commitment.”
Turner says this is a question which deserves wide-ranging debate, as best possible to forge a social consensus and is not a question which a regulator can resolve on the basis of technical analysis alone.
He adds: “The analysis required to enable an informed debate on this issue needs to be of the highest quality and clearly presented. This means that we will not be publishing our proposal before early autumn but I trust that when it is forthcoming, it generates the engagement that this important question deserves.”