FSA closes the doors after the horse has bolted

It is surely beyond belief that according to the FSA,at the height of Britain's booming mortgage market, nearly half of the total amount lent was done so without any checks being made that borrowers had the income they claimed to repay their loans.

The soon to be abolished Financial regulator has published plans to prevent a return of the risky mortgage lending seen in boom times.

Their Mortgage Market Review aims to prevent a recurrence of the "irresponsible lending"which resulted in some borrowers taking on mortgages which only seemed affordable on the assumption that house prices would always rise

The result being that many of those borrowers ended up struggling to repay their mortgage and in danger of losing their home.

The review recommends that loans should only be approved where there is an expectation that it can be repaid without having to rely on "uncertain" house price rises in the future.

According to the FSA,around 15 per cent of borrowers who took out mortgages between 2005 and 2010 could be in negative equity,

Lord Turner, chairman of the FSA, said of the proposals:

“We believe that these are common sense proposals which serve the interests of both lenders and borrowers. While the excesses of the pre-crisis period have largely disappeared from the current market, it is important to ensure that better practice endures in future when memories of the crisis recede and the dangers of poor practice return.

Over regulation the FSA way

The FSA have been widely criticised for their role in the financial crisis especially in failing to see the problems at Northern Rock and RBS.

Fintag explains what the problem may be

One of the reasons I want to leave the UK is the FSA. I was fined yesterday (and I take this personally because its my income they are stealing). I didn't get an FSA return in on time. Its FSA018a Pillar 1 or something. We used to send in quarterly returns. And then one at the year end. There were 2 return templates and it took 10 minutes for them to be printed out from our Sage 50 accounting system. Now someone has to type them in to a website and remember to do so which is often when the moon is full and Big Ben has struck 13.

It will be remembered that regulation was taken from the Bank of England on its independence back in the heady days of 1997.

Fintag continues

In this new world of over regulation, we now have nearly 50 reports to complete on line. Most are not applicable but you have to verify just in case. Our compliance legal team have to check radio buttons and fill in fields to questions like "Do you have PI?" or "How much capital have you put aside in case there is an earthquake?".

Now renmind me who was responsible for this.....Ah Yes it was Ed Balls now in charge of children

Turner-the biggest mistake was an banking intellectual failure

I am not a great fan of the Financial Services authority so was interested in listening to Lord Turner on the Today programme this morning.

He says that mistakes were made by individuals but the biggest problem was that there was an intellectual failure to appreciate that the banking community was building up a risky system

He believes that the latest banking crisis is not that the banks are in a worst position now than they were last October but that the markets has still not got confidence in the system.

He dismissed the Conservative calls for a complete bank audit believing that it totally misses the point,bringing out the point that the losses are known but what is uncertain is the capitalisation value of the banks.

He was also fairly dismissive that the re introduction of short selling has contributed to the latest falls in the markets but vowing to reintroduce the measures if the signs are that it is contributing.

Perhaps his comments that the authorities will not allow the banks to collapse may be the headline that comes from this interview,but as he points out no body knows how deep the recession is and therefore future losses from the banks are unpredictable.

A liitel snippet of information regarding George Osborne is doing the rounds.

Over at Boulton and Co,Alistair Bunkall is reporting that the chairman of the FSA has littel time for the shadow chancellor

A contact of mine in the city just messaged to say that he witnessed a meeting between Lord Turner and George Osborne this afternoon.
I'm told that when the latter was safely out of earshot, Adair Turner muttered "Bloody Fool" under his breath.
Apparently poor George carried on oblivious!