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FSA says compliance not up to scratch at some societies

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.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. Julian Stevens 15th May 2011 at 12:29 pm

    This hardly constitutes a surprising discovery on the part of the FSA after 20+ years of so-called regulation, given that the sales practices of many building societies are only a small step removed from those of most of the banks. A prime example is the debacle over N&P’s sales practices.

    The first thing the FSA should stipulate is that the building societies have centralised compliance and business assessment departments and that those departments function in a similar fashion to their IFA network counterparts. The FSA would then issue policy directives and police their implementation by way of spot checks, again in the same way as they do with the networks. It’s called regulation by proxy and, given that no levy discounts are offered, is hardly fair (fair not being a word in the FSA’s vocabulary except when it comes to dictating how others must behave) but, as far as I’m aware, it’s a system that seems largely to work. When did we last hear of systemic compliance failings within any network? So why hasn’t the FSA yet imposed a similar system on the building societies? Probably because it’s been too busy beating up small IFA firms. Small IFA’s may not, as a species, be in any way perfect, but it would be nice if the FSA could at least make some effort to apply its regulatory policies even-handedly across all sectors of the advisory community. That’s one of the principal gripes from the IFA sector ~ the fact that we seem to be singled out harsher regulatory treatment than most other sectors, despite Hector Sants’ denial of the FSA having any anti-IFA agenda. The FSA talks about the perception of commission bias, yet conveniently ignores complaints about perceived regulatory bias. And so it goes.

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