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CML urges Mervyn King to show leadership

The Council of Mortgage Lenders chairman Steven Crawshaw has urged Bank of England governor Mervyn King to show leadership in response to the credit crunch.

Speaking at the CML annual lunch Crawshaw said: “So today my message to Mervyn King is this. We urge you, governor, to show leadership in the proactive coordination of central bank responses globally to the current systemic risks. And in the UK, deliver on your recent hints to the Treasury Select Committee that you would be prepared to be more flexible. The main short term palliative is in the hands of the Bank of England, and there is a real and immediate need for broader based action than we have seen to date.”

Crawshaw said the industry and the Bank of England had conflicting reasons for the liquidity crisis facing the UK.

He said: “The Bank has diagnosed the overhang of assets as the disease. We see it as a symptom. It believes that institutions are hoarding liquidity because they do not trust other banks and so are reluctant to lend to each other. We think that lenders are hoarding liquidity because they’re concerned about whether they will be able to access future funding and are managing pipelines of business very cautiously.

“They’re worried less about the here and now and credit risk in the UK mortgage market, than the uncertainty about whether they’ll be able to get funds when they need to refinance their own maturing debt commitments and new mortgage offers they are seeking to make.”

Crawshaw said if the CML’s diagnosis was right, then deeper and longer term repo facilities – extending beyond the 3-month facility to 12 months or perhaps even 24 months – would definitely begin to help to address lenders’ concerns. He urged the Bank to kick-start the market for new issuance of mortgage-backed securities perhaps by incentivising stable, domestic investors such as pension funds.

He said: “If we await the return of global investors without taking action to reinforce why our market is different to the United States, we must accept that our new business levels will shrink substantially and for a significant period of time.”


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