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published OCTOBER 20, 2009

Denton Wilde Sapte´s Rosali Pretoriu on FSA's rules to curb bank lending - hopefully not baby and bathwater

Rosali Pretorius, financial markets and regulation partner at Denton Wilde Sapte says: "In other countries where regulators have imposed limits on bank lending to finance home ownership, politicians have made much of the fact that that saved them to some extent of the full effects of what some now call the "Great Recession". So it's not surprising that the UK regulator is introducing similar measures. The FSA discussion paper run into 118 pages; no doubt, banks and mortgage distributors will take some time over the next few days and weeks to respond to the points made. What's clear is that the regulator is serious and some form of regulation around distribution of mortgages and further regulation around some products is coming. The FSA should be careful not to throw out the baby with the bathwater. Not so long ago, there were wide spread concerns on financial exclusion. Impose too many rigours on the banks and the "hard working families" the politicians are fond to speak of will have no access to lending to get on the housing ladder. Unusual applicants should not be excluded just because the breadwinners are self employed or cannot easily get conventional insurance on account of medical conditions. Also, the regulator and the banks may usefully focus on the sources of information the banks rely on. How accurate are the credit reference agency databases, the electoral registries?"