Speaking at the Building Societies Association annual conference in Manchester, Bullock said the FSA has been very slow to pick up on the role of the intermediary in the market.
“They are playing a large role in the industry and at the moment their capital does not reflect the role they play in the system. The truth is that the power lies with the intermediaries in the market and not the providers. I think the introduction of a variable capital regime for brokers is, I would say, a rising certainty.”
Bullock said the broking market once has one third of the mortgage market but this has now increased to two thirds. “That’s a very profound shift in market power.”
He added: “I do think the FSA’s view about where the power lies in the market is just old fashioned.”
FSA director of retail policy division Dan Waters told delegates that the case for a true risk based capital arrangement for IFAs is quite a difficult one to make.
He said: “There are constraints upon us in the directive which means it would be quite difficult to achieve. I wouldn’t close the door on that debate – it’s very much still alive – but we’re also looking at other incentives upon IFAs in terms of capital in the business, especially when they leave the market. We want something to be there in case claims are made as claims can be made for quite a long time afterwards.”
Waters admitted that there are “some very tricky issues” regarding a capital regime for brokers but said it was in the process of consulting on this at the moment. He told Bullock that the FSA was very much aware of the power of distributors.