FSA chairman Adair Turner says the regulator is “crawling all over” lenders’ practices in the commercial real estate sector.
He told MPs the FSA does not regulate the sector through conduct regulation but has started to look at how it can monitor banks through prudential regulation.
When asked if the FSA is looking at how banks lend in this sector, Turner said: “We are crawling all over it but I think the nature of commercial real estate means it does not give itself to a set of rules. But what I can absolutely assure you is that, on the prudential side, the issue of commercial real estate lending is now, and will be in the future, a key focus of the PRA and the FPC.”
Turner admitted the FSA has not paid enough attention to the issue in the past, noting poor decisions in the commercial lending sector was a factor behind the near demise of HBOS, before being bailed out by the Government.
He said: “The perfectly reasonable question raised by the HBOS document that came out last week, which tells a terrible story of bad lending in commercial real estate and bad controls, is what was the FSA doing? We were not doing enough.”
Emba group sales and marketing director Mike Fitzgerald says: “What the banks and their customers do not need is more obstacles to lending in the commercial sector.”