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FCA and Bank of England to step-up product transfer and second charge surveillance

  • 13/12/2018
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FCA and Bank of England to step-up product transfer and second charge surveillance
The Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) are increasing oversight of product transfers, second charge loans and mortgages sold to unregulated firms.


Mortgage lenders will have to report more data under proposals announced by the two authorities.

The regulators said they have identified a number of areas where more data is needed from firms through Product Sales Data (PSD) and Mortgage Lending and Administration Return (MLAR).

There are gaps in sales data about internal product transfers and performance data about mortgage books that have been sold to unregulated entities, according to the FCA.

The watchdog said without the information its “ability to understand possible conduct and competition harms in the mortgage market is limited”.

Both authorities also say they are not given enough information in PSD about the Bank of England’s Loan to Income (LTI) flow limit recommendations, and its affordability tests.

And the FCA also said it needs more information on second charge mortgages, and loans sold to third parties or securitised.

A consultation paper on new reporting requirements for lenders has now been jointly launched by the two watchdogs.


Lenders required to hand over more information

Under the changes, lenders will have to give PSD sales reports on internal product transfers and further advances, as well as information on any other outstanding debt secured on the property with the same lender at the point a loan is first made.

And reports on the contractual reversion rate offered to customers will also have to be submitted.

At the same time, second charge mortgage reports will have to contain information on any other outstanding debt secured on the property with other lenders at the point a new loan is made.

Second charge administrators will also have to submit an additional form in MLAR on the number and value of loans they administer.

The regulators said they are aware changes to reporting systems can be costly for firms, which is why they launched a joint consultation to limit the need for changes in the future.

The FCA said data will help identify and address potential harm to consumers as part of ongoing firm supervision.

The Bank of England and the PRA use data to monitor macro-prudential risk in the housing market, and to support firm supervision.

The consultation closes on March 22 2019.

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