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Direct deals deemed fair play by regulator

FSA chief executive Hector Sants has made it clear the regulator does not believe that dual-pricing on mortgages goes against the principles of treating customers fairly.

Speaking at the Building Societies Association Conference in Manchester last week, Sants said brokers had asked the FSA if the practice was fair. His response was that lenders are not obliged to deal through brokers.

He said: “We are becoming increasingly aware of changing market dynamics that are putting increasing pressure on mortgage intermediaries as some lenders are only offering certain deals directly to customers.

“We have been approached by a number of intermediaries, asking if this practice is fair under TCF. Our reply is that lenders are not obliged to deal through brokers. How they choose to price their products is a commercial matter.

“If certain lenders decide to offer their direct customers cheaper deals, we do not see that customers’ best interests would be best served by preventing this.”

Sants denied suggestions that the regulator has required some firms to increase liquidity ratios to 35 per cent.

He said: “I would like to make clear that is simply not true: we have never said that. Our historic numeric limit continues to apply that societies should hold eight-day liquidity in excess of 3.5 per cent of the total funding liability.”

Sants said that the 20 per cent liquidity level is a trigger for the FSA to initiate more intensive dialogue with a building society about its funding model.

He said that in difficult financial markets, firms do face an increased funding risk and this needs to be taken into account by the FSA.

Sants also warned delegates that excessive concentration in the buy-to-let market, continued acquisition of mortgage books – even when routine funding was becoming problematic – together with poor understanding of the extra risk of commercial borrowing were three areas of potential danger points where the FSA had concerns in its supervision of societies in the last year.


‘Cost of regulation set to hit 50bn’

Spending on regulation and compliance for the world’s 100 biggest financial institutions could almost double to 50bn by 2010 after a rise of more than 30 per cent over the past three years, according to Deloitte.

Take it to the limit

Following the changes to the inheritance tax treatment of trusts contained in the Finance Act 2006, the Association of British Insurers asked HM Revenue & Customs to increase the IHT reporting limits for chargeable transfers to reduce the number of returns made where no tax will be payable.


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