Hal Austin: Overkill at the FSA

For some time now the City regulator has been accused of being like a loose cannon, of announcing policy in keynote speeches, quite often to small audiences.

Other critics have accused the all-powerful regulator of dispensing justice like Wild West cowboys.

The reality is even worse – it has now set itself up as the referee in chief of the financial crisis, of being the chief judge of the mortgage market, of being the final arbiter, of who should and should not get a 100 per cent mortgage.

Here is Lesley Titcomb, director of small firms and contact centre, addressing the Mortgage Business Expo in November, 2009: “Our existing rules did not do enough to prevent the irresponsible lending and borrowing or to secure the fair treatment of borrowers, so we have had to look at why that is and in our paper we’ve set out proposals to make improvements…”

This speech, and the many given by Lord Turner and others, is simply self-justificatory.

Few will question the regulator’s concerns about the so-called self-certified mortgages, although it is clear they are using a sledgehammer to crack a nut.

All that is needed is to inform the borrower that all the information provided would be passed on to HMRC.

However, by pretending that fraudulent borrowers are the entire problem is being disingenuous. We have told a story in this paper about attending a meeting in West London years ago with a senior manager from a leading lender when one member of the audience, who claimed to be a bus driver on £70,000 a year, asked how much information was passed on to the tax office.

On our way back in to London, when the issue was raised, the mortgage manager had sudden amnesia. It was clear during the boom years that many lenders knew what was going on, and if they did not, deliberately set out not to know.

The fact is, it has taken over 600 pages, and nearly a thousand, if the various speeches from FSA chairman Lord (Adair) Turner are added to the mix, for this august body to be persistently wrong on the Mortgage Market Review.

It is wrong on every important measure: first, it is not the duty of the regulator, at least in a democracy, to tell legally constituted corporate bodies who to lend money to, as long as its policies are legal, transparent and fair.

If a mortgage lender has taken due diligence, and a borrower has honestly declared his or her earnings and outgoings, then the decision on whether to lend is a corporate one, for the chief executive and his senior management team.

The regulator has no right interfering in that commercial arrangement one way or the other.