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Lenders scared off by liquidity checks

The Association of Mortgage Intermediaries says the FSA has switched its mortgage focus to liquidity spot checks which have seen some firms stop lending.

At a Abbey for Intermediaries conference last week, AMI director general Chris Cummings warned brokers that conversations with FSA supervisors will now be “very different” than before the liquidity crisis.

He said: “The FSA is now doing spot liquidity checks. Last Thursday afternoon, I met with six finance directors of lending institutions who had two-hour phone calls with people from the FSA wanting to know what their liquidity positions were like. Some of those lenders stopped lending because of those phone calls. That is not helpful regulation at the moment.”

Cummings said the regulator is changing hats and will be focusing on prudential regulation.

He said: “It has been phenomenally busy on the conduct of business regulation. The pendulum has swung completely the other way. The next couple of years will be marked by a period of prudential regulation, looking at your capital, your liquidity, how you are managing the finances that underpin your business.”

An FSA spokeswoman says: “There is no doubt that we have got heightened supervision at the moment. We are talking to firms in general more often and, as you would expect, we are talking to them about their liquidity position.”

Brentchase Financial Services mortgage specialist Mike Fitzgerald says: “It is not helpful to the situation. It is worrying lenders and putting the fear of God into them. If they had shown more interest a year ago, we might not have been in such a bad position.”

Conference reports, p24

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