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The media’s eyes are on the mortgage world

Northern Rock continues to hog the headlines in what must be the most drawn out affair the mortgage industry has ever seen.

With the whole of the UK’s media now scrutinising the mortgage market’s every move, the industry is set to continue under the spotlight for at least the rest of the year.

The long-awaited Treasury select committee report on the Northern Rock debacle is set to be published tomorrow, details of which have already been leaked into the media.

The report is expected to conclude that the FSA should not be given new powers to intervene to help distressed banks. A leaked copy of the report to The Times has signalled that the TSC does not believe the FSA deserves additional powers, given that it was unable to identify the flaws in the Northern Rock business model and prevent a subsequent run on the bank.

This conclusion of course comes into direct contrast against Chancellor Alistair Darling’s recent announcement that the FSA will be given insolvency powers which would allow it to intervene in failing banks and seize depositors’ cash to avoid a repeat of the Northern Rock debacle.

The Government will publish its plans for reform next week before a 12-week consultation is kicked off. Darling aims to introduce the primary legislation in May.

In an interview at the beginning of January he said: “There will be a number of aspects to it, but it will include giving the Financial Services Authority greater powers to ensure that it can be satisfied not only that capital requirements are met but also that there is greater attention paid to liquidity requirements.”

Shadow Chancellor George Osborne has made it clear that his party believes it is wrong to give the FSA bank rescue powers and instead says that these should rest with the Bank of England.

If the TSC report does in fact make this criticism of the FSA clear then there is likely to be increased pressure on the Chancellor to scrap his planned proposals.

This week also saw the Government announce its plans to convert Northern Rock’s £25bn Bank of England loan into state-backed loans in a bid to encourage a private sector rescue.

Speculation has already started that new bidders – and old ones – are likely to now enter the frame with the return of Cerberus, JC Flowers and Lloyds TSB mooted.

But it appears that despite some mortgage brokers believing the proposal is a good move in the long term, some are more cynical.

Robert Sterling managing director Kevin Duffy believes the deal is a “fudge” and that it is clear that Gordon Brown and business tycoon Richard Branson have done a deal following all the pictures in the press of their shared plane trip.

In other news, Money Marketing reported this week that mortgage broker John Charcol has admitted that it will have to file its latest set of accounts over three months late due to – it claims – directorate changes.

The interesting numbers to emerge from its last set of accounts – for the 14-month period ending December 31, 2005 – show that it made a consolidated loss after tax of £4,712,459. While turnover was £17.4m, the firm had to pay £22m on administrative expenses.

The firm says it will be filing its next set of accounts in the first week of February – despite being due last October – so it will be interesting to see how much its accounts have improved since the end of 2005. This is especially so as the firm now has a sale price tag of £50m around its collar after it announced this month it was now up for sale.

The firm was bought by Bradford & Bingley in 2000 for a price of £100m but then sold back to its founders and venture capitalists for under £10m just four years later.

Head of communications Drew Wotherspoon says: “When John Charcol was sold back from Bradford & Bingley, we found it quite cost-heavy. We have had 18 months of cost-cutting and quite a few redundancies. We have been driving back business in profit.”


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