Royal Bank of Scotland managed to put the cat firmly among the pigeons last week, with its announcement that it would earmark £1.7bn to fund mortgage lending in Scotland up to 90% LTV.
Our own readers were none too pleased with the news. We received a flurry of emails railing against the decision. Many pointed out that it was not just Scottish taxpayers who bailed out RBS. Others accused Gordon Brown and Alistair Darling of looking after their own or buying the Scottish vote, and called on all RBS customers south of the border to close their accounts. One reader actually accused the bank of racism.
Of course, the £1.7bn is just part of the £9bn in extra mortgage lending that RBS announced the previous week, the remainder of which will presumably be spread throughout the country. As Scotland represents roughly 10% of the UK mortgage market, it would appear that RBS is being overly generous in pledging £1.7bn north of the border – almost twice the £0.9bn that strict proportional allocation would dictate. But brokers should perhaps be more concerned about how much of the total will be distributed via the intermediary sector – something which RBS has yet to reveal.
However, the extra mortgage lending promised by RBS, Northern Rock and Lloyds Banking Group is something, and it may give a nudge to the frozen housing market. Then again, the figures promised are so small – £9bn, £5bn and £3bn respectively – that any thaw it brings about will be minimal, like holding a match to a glacier.
Speaking of glaciers, I imagine the atmosphere at the FSA must have been fairly frosty when Sarah Wilson, director of Treating Customers Fairly, announced on Wednesday that she was stepping down. Wilson has cited ‘personal reasons’ for giving up her post, which may be the case, but her timing is surely going to attract speculation. The deadline for firms complying with the FSA’s TCF principles was December 2008, and Wilson’s resignation comes just as the FSA is supposed to embark on a round of visits to ensure that firms are implementing TCF principles.
The day after her resignation, Hector Sants, chief executive of the FSA, made a landmark speech to Reuters in which he admitted that principles-based regulation had failed: “…the limitations of a purely principles-based regime have to be recognised. I continue to believe that the majority of market participants are decent people; however, a principles-based approach does not work with individuals who have no principles.”
And yet Sants continued to reject the idea of rule-based regulation. It is not about ticking boxes, he said, but about executives understanding that they will be judged on the results of the actions they take. The latest FSA strapline is ‘outcome-focused regulation’.
So does that mean that the FSA will not check to see whether firms have implemented TCF principles (as principles cannot be enforced), but will wait instead to see what the outcomes of TCF will be? If so, how far down the line do you have to go to wait for the outcome? Will FSA action only be triggered when a mortgage is missold and complained about or a fraudulent case comes to light?
Confused? It’s hardly surprising that Sarah Wilson is off. And I’m certainly not heartened by Sants’ further statement that in future, the FSA will seek “to make judgments on the judgments of senior management and take actions if in our view those actions will lead to risks to our statutory objectives …our judgments will not necessarily always be correct with hindsight.” Thanks for the vote of confidence in yourselves, Hector.
What a truly sad week last week was. The extent of the effect of the current crisis on brokers was thrown into sharp relief by both Chase de Vere and Cobalt going into administration. A year ago, no-one would have believed that two high-profile, well-managed expert companies could go to the wall. No doubt many of the talented individuals concerned will bounce back at some point. Indeed, it will be interesting to see if anyone rises, phoenix-like from the flames. And it does make you wonder who will be next. n
