Former Aifa director general Paul Smee has returned to financial services to head the Council of Mortgage lenders, with regulatory battles still top of his agenda.
As the first director general of Aifa, Smee is used to going head to head with regulatory bodies and, with the FSA’s mortgage market review and the European Commission’s mortgage credit directive causing huge concerns for lenders, he has plenty on his plate.
He says it is essential that regulators and the industry work hand in hand to create sensible policy. “I would love to see a market that is growing in a sustainable and healthy way. This requires a co-ordinated approach at policy level and contributions from those involved in housing policy, regulatory policy and European policy.”
After reading classics at Oxford, Smee joined what was then the Department of Trade and Industry for a 10-year stint as a civil servant. A lengthy period at the London Stock Exchange followed before he joined the Association of British Insurers as head of life insurance. He moved away from financial services in 1996 to join the Independent Television Commission.
Smee returned to financial services in 1999 as the founding director general of Aifa. It is this role for which he is probably best known among intermediaries.
He left Aifa in 2004 to become chief executive of the Payments Council and last month he took over from CML director general Michael Coogan, who spent 15 years in the role.
Smee is acutely aware of the threats and challenges, especially from the MMR.
“I think the risk with a lot of these big regulatory projects is they see their goals in terms of delivering regulation, whereas I think we must regard them in light of what they do for the housing market. We will be measuring what comes from the FSA in terms of what it does for housing supply and finance but obviously we will do this within the framework of responsible lending.”
Smee is ready to grapple with the European authorities to try to ensure the mortgage credit directive does not raise undesirable consequences for UK lenders. “I have a lot of experience of directives and I believe the number of problems they cause is in exact proportion to the number of words they contain. The shorter and more succinct you can get the text, the better. All I will be saying to the authorities is, keep it short and simple.”
As it stands, the mortgage directive could see lenders having to scrap their tied advice propositions in favour of an information-only service but Smee is fairly confident that policymakers will iron out some of these problems during the redrafting process, which looks set to conclude by the end of the year.
“I suspect if you took the drafters of the directive to one side and said, ’Do you realise you may end up dispensing with in-house advice teams?’, I am sure they would say they did not intend that. I suspect that is the sort of thing may be washed through in the drafting and redrafting.”
Smee also believes the directive will provide little benefit compared with its costs. “Any pan-European scheme has to be proportionate. I think there are often things that may look good on paper but when you examine the practicalities and do a formal cost-benefit impact assessment, you realise the benefits are fairly small compared with the cost.
“One of the key things we will be looking for in the passage of the directive is some pretty crunchy cost-benefit analysis from the authorities to justify any changes they are thinking of making.”
Regulatory issues aside, the UK mortgage market is in a vulnerable state, with gross lending levels standing at just over a third of what they were before the crisis. However, Smee believes the market is still on course to reach the £140bn gross lending figure the CML predicted earlier this year.
“We have gauged from the evidence available to us that £140bn is achievable. We are constantly looking at evidence and if it looks like we need to make a change, we will make a change.”
Smee believes one of the main obstacles to getting lending back on its feet is the lack of consumer confidence in the mortgage market and says the whole sector has a role to play in restoring public confidence.
“I think there is a confidence issue. There is always a pendulum between over-confidence and a lack of confidence and this applies to intermediaries as well as the CML’s members. What we need to do is stress that investing in property and taking out a mortgage is quite a sensible decision.”
But for now, Smee has one overriding aim. “In my first 12 months, I want to ensure that the voice of the CML as the financer of the mortgage market is clearly heard. I also want to make sure the regulatory regime is conducive to delivering what all the debates on housing policy are pushing for.”
Born: 1956 in Liverpool
Lives: South London with wife, Penny
Education: BA in Classics at Oxford University
Career: 2011-present: director general, Council of Mortgage Lenders; 2005-11: chief executive, UK Payments; 1999-2004: director general, Aifa; 1996-99: director of public affairs, Independent Television Commission; 1994-96: head of life insurance, ABI; 1988-94: head of public policy and international relations, London Stock Exchange; 1978-88: civil servant, Department of Trade and Industry </B>
Likes: Opera, cricket and history
Dislikes: Sloppy thinking, bad grammar and Twitter
Drives: Walking is better for you
Book: Postwar by Tony Judt
Film: Life of Brian
Album: Magic by Bruce Springsteen
Career ambition: To be a trade association guru
Life ambition: Carpe diem
If I wasn’t doing this I would be…Unemployed