BSA hits out at proposed FSA clampdown
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In its response to the FSA’s consultation paper into the future of building society regulation, the BSA says the stringent new proposals are unfair and will hinder mutuals’ abilities to compete in the UK mortgage market.
The FSA launched its CP 07/19 in the wake of the collapse of Dunfermiline Building Society, coupled with the forced rescues of Cheshire, Scarborough and Derbyshire over the last 12 months. But the BSA says the regulator has gone too far in its attempts to maintain the sector.
It says proposed limitation on funding lines and activities within the wholesale market will further hinder societies’ ability to raise mortgage funds. It also questions proposals whereby mutuals may have to offer more simplified products with higher charges attached to them.
BSA director general Adrian Coles says: “We welcomed the assurance that this consultation was in no way intended to restrict societies’ ability to compete with banks – though again we now doubt that the result will be as intended.”
Coles says his association’s main concern is that much of the detail of the proposals will fail to promote a “strong, vibrant mutual sector”.
He says: “In many areas, the proposals will lead to unintended consequences for individual societies. And we question whether the aggregate impact of the introduction of these proposals in the current market conditions has been appropriately considered and analysed.”
The BSA has argued that the FSA should first complete its assessment of the whole mortgage market, due at the end of the month, before it makes rulings on the building society lending sector.
Coles says: “In short, there is a significant risk that, far from strengthening mutual building societies, the initial effect of the paper may be to weaken them.”
The Council of Mortgage Lenders echoed these concerns last week. It warned that the proposals would effectively shoehorn firms into categories, creating new regulatory hurdles and tensions, particularly for those firms that do not neatly fit into one particular classification.
It also warns that the proposed classifications could create barriers to buy-to-let and shared ownership lending by societies.
The CML says: “We believe it is more appropriate to consider all of these issues as part of the wider mortgage market review. The proposed consultation appears to contradict the FSA’s stated preference for its ongoing mortgage market review to look at the whole market, identify what has worked well for consumers and what has not, and explore all the options for putting things right.”
