The FSA has expressed concerns about compliance structures within some building societies and warned firms they must improve their procedures.
Speaking last week at the Building Societies Association annual conference in Birmingham, FSA director of conduct policy Sheila Nicoll said the regulator is concerned that the compliance checks carried out by some societies are not up to scratch.
She said: “Our supervision of building societies reveals it is far from clear how robust and effective some of your compliance arrangements are.
“If you have not already done so, you need to review your compliance arrangements to make sure they are robust, comprehensive and up to date.”
BSA head of mortgage policy Paul Broadhead says: “We have not seen any evidence of non-compliance from our members. If there are any areas of non-compliance, they will be taken very seriously and dealt with but I certainly would not see it as a widespread problem.”
Nicoll also said the FSA is right to press ahead with the mortgage market review despite the European Union having not yet finalised its own Europe-wide mortgage market rules.
Last month, the European Commission set out draft rules for a directive on mortgage lending to standardise and improve lending and borrowing practices across member states.
Nicoll said: “We all have an interest in a robust check on affordability in every case. But what we also need – and it is encouraging to see the European Commission and the Financial Stability Board recognise this – is for the beneficial diversity and effective operation of national markets to be ensured.
“Moves to strengthen protection in the UK market should not necessarily have to wait for EU and international changes, which could take many years.”
First Action Finance head of communications Jonathan Cornell says: “There is probably bad behaviour across every sector. But I do think it is harder for the small societies to stay compliant than the big banks as they have fewer resources, whereas the banks have big compliance departments.”