FCA plans new review of interest-only borrowers near term-end
Around 1.8 million UK home owners currently have outstanding interest-only mortgages, excluding buy-to-let, and many do not have an appropriate strategy to repay them, said the Financial Conduct Authority.
It said: “We will look at how firms treat borrowers whose interest-only mortgages are approaching maturity and their ability to ensure these customers are treated fairly. This will include those interest-only mortgages that are due to be repaid by 2020 – where borrowers have the least amount of time to find a solution.”
The number of borrowers reaching term-end on interest-only mortgages with no repayment vehicle is expected to peak at around 10,000 customers a year until 2020, according to Key Retirement.
Consumer research conducted by GFK and commissioned by the FCA, which reported in May 2013, suggested of those with a mortgage due for repayment up to and including 2022, 49% would have an average shortfall of £56,200.
The regulator’s messaging has been mixed on interest-only, from Martin Wheatley’s ticking time bomb assertion in 2012 to suggestions that the clamp down had led to a lack of interest-only products in 2013.
Lenders including Santander, Virgin Money, NatWest, Leeds BS and Scottish Widows have been among lenders relaxing interest-only criteria and seeking market share in recent years.
Dean Mirfin, technical director at Key Retirement, said of the 10,000 borrowers coming to term-end, 5,000 are expected to have no repayment vehicle at all.
Mirfin said: “It is essential, for this first wave of maturities, that banks and other lending institutions take action sooner than later, these customers are the most vulnerable as they have little time to act. We are engaging with a number of lenders to support their range of solutions but sadly not enough. We hope that the FCA’s announcement expedites that progress.”
The equity release sector broke through the £2bn lending barrier for the first time in 2016 and has become the fastest growing sector in the mortgage market driven by the ageing population, people working later and interest-only maturities.
A total of 27,534 new lifetime plans were agreed in 2017, up 22%, although it remains a small segment of the overall market.
FCA’s Wheatley paid £827,000 in 2016 despite exit
The FCA’s annual report said that while Wheatley (pictured) stepped down from his role as chief executive at the FCA almost a year ago and from the board in September 2015, he will continue to be employed by the FCA until the end of July this year.
Wheatley’s basic salary amounted to £633,000 during the year ending 31 March, up from £460,000 a year earlier. His remuneration also included performance-related pay, which was almost halved to £48,000 from £92,000, as well as pension and other benefits.
Tracey McDermott, who stepped in for Wheatley before he was replaced on a permanent basis by Andrew Bailey, was paid a total of £570,000 for the year to the end of March. Chairman John Griffith-Jones and director of strategy and competition, Christopher Woolard, were paid £192,000 and £286,000, respectively.
The FCA’s annual report showed that the regulator turned around a £58.3m loss in 2015 to achieve a surplus of £3.8m during the 12 months to 31 March.
Income of £494.3m was generated by the FCA in the 2016 financial year, which was mostly made up of ongoing regulatory fees at £479m, but also accounted for a big increase in consumer credit fees which rose from £0.5m in 2015 to £10.4m a year later.
In terms of the regulatory landscape going forward, Griffith-Jones said the UK vote to leave the European Union had “significant implications”.
“Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made which will be a matter for government and parliament,” he added.
“The longer-term impact of the decision to leave the EU on the overall regulatory framework will depend in part on the relationship that the UK seeks with the EU in future. We will work closely with the government as it confirms those arrangements.”
MPs given powers to veto major FCA appointments
In a letter to the committee’s chair Andrew Tyrie MP, Chancellor George Osborne said that in a future Bill he will aim to make CEO of the regulator subject to a fixed, renewable five-year term.
These changes will not apply to Andrew Bailey, who was recently announced as Martin Wheatley’s successor, but will affect the next person to take up the appointment after Bailey.
Last year Martin Wheatley stepped down as chief executive of the FCA amid reports that he had been ‘forced out’ by Osborne, who had refused to renew his board membership at the regulator.
After MPs tabled the amendment to the Bill in February, Tyrie explained that the public should have confidence that the government was not interfering with independent supervisors and regulators.
Osborne said he would ensure appointments to the head of the FCA would enable the committee to hold a hearing after the appointment is announced, but before it is formalised.
“Should the TSC recommend in its report that the appointment be put as a motion to the whole House [of Commons] the government will make time for this motion and respect the decision of the House,” he said.
Tyrie said the committee and government’s influence over the appointment and dismissal of future FCA bosses had been “greatly strengthened”.
“Parliament will now be better placed to safeguard the FCA from interference – or the perception of interference – by the Treasury or Treasury ministers,” he added.
“Quangos are acquiring huge powers across government. Unless they are required by parliament to explain their actions to select committees, the risk will be that many will be left unaccountable, in practice, to anybody. That is why a greater role for parliament, and for select committees, in the appointment and dismissal of the people that head up these quangos is so important.”
MPs call for veto power over FCA chief exec appointment
Andrew Tyrie MP, chairman of the TSC (pictured), said the public should have confidence that the government was not interfering with independent supervisors and regulators.
Members of the committee have tabled an amendment to the Bank of England and Financial Services Bill which would allow MPs a veto over the appointment and dismissal of the chief executive of the Financial Conduct Authority (FCA).
Last year Martin Wheatley stepped down as chief executive of the FCA after it was rumoured he had been ‘forced out’ by George Osborne, who had refused to renew his board membership at the regulator.
Following weeks of speculation, the FCA announced in January that Andrew Bailey, deputy governor of prudential regulation at the Bank of England and chief executive of the Prudential Regulation Authority would take over from Wheatley as the financial regulator’s chief executive.
The committee’s report on ‘scrutiny of appointments’ recommends that pre-appointment hearings should take place for the chief executive of the FCA, with the appointment entrenched by a statutory veto on appointments and dismissals to the post.
In the report, Tyrie has also outlined the need for scrutiny of top appointments at the Bank of England, Office for Tax Simplification and the Prudential Regulation Committee.
Tyrie said that public appointments to quangos have needed rigorous scrutiny “for years”.
“More of the most powerful appointments – of the chief executive of the FCA and the governor of the Bank of England – should be subject to full pre-appointment scrutiny. The government continues to disagree, appealing to the ‘market sensitivity’ of these appointments. That is not an adequate explanation,” he said.
“The time has come to entrench the independence of the post of chief executive of the FCA. The chief executive of the FCA should be able to operate with the confidence that he or she cannot be dismissed without parliament’s – the treasury committee’s – approval. The public, too, need to have confidence that the government is not interfering with independent supervisors and regulators.”
Former Ofcom boss pulls out of contest for FCA top job
According to a report in the Telegraph, Richards was the favourite among a number of top City executives to head up the FCA, but friends of Richards have said he is not interested in the job.
Richards recently led the Trade Associations Review, which is proposing that all key financial trade associations should join forces to create a super trade body. The review’s recommendations cover seven trade bodies including the Council of Mortgage Lenders and British Bankers’ Association. Members of the Building Societies Association and Finance Leasing Association have voted against taking part in the proposed integration.
Since the FCA’s former chief executive Martin Wheatley left his role last year, Tracey McDermott has been acting in the role on an interim basis and was tipped as one of the front runners to take the role on a permanent basis. However, earlier this month Chancellor George Osborne announced that she did not want the job in the long term.
Wheatley, infamous for his tough stance on banks, handed his notice in last year after Osborne refused to renew his role as adviser to the FCA’s board. Commenting on the departure, the Chancellor said Wheatley had done a ‘brilliant job’ but explained that different leadership was needed to take the organisation ‘to the next stage of its development’.
Remaining potential candidates for the role include Australian regulator Greg Medcraft and Swiss regulator Mark Branson. The Bank of England’s Andy Haldane and former secretary to the Treasury Sir Nicholas Macpherson are also rumoured to be in the running.
Speaking to the Telegraph, Paul Lynam, chief executive of Secure Trust Bank, said: “The FCA regulates a huge number of disparate financial services businesses. Filling such a role is invariably difficult.
“A lot of the businesses regulated serve UK consumers and SMEs. Personally I think a grizzled UK retail and corporate banker who knows all the tricks, who understands the regulatory environment and knows how insurance and investment markets work would be a good choice.”
McDermott denies FCA taking ‘soft’ approach on Osborne’s orders
Concerns were raised by the Treasury Select Committee (TSC) when the FCA dropped its review into banking culture which would see it examine areas such as remuneration, appraisal and promotion decisions made by middle managers.
TSC chairman Andrew Tyrie described the decision as ‘odd’ and has summoned McDermott and FCA chairman John Griffith-Jones to appear before the committee.
In a bid to set the record straight, McDermott (pictured) told Money Box presenter Paul Lewis that the suggestion the regulator was taking the government line could not be further from the truth.
“We are not going soft on the banks, we are not being told what to do by the government,” she said. “We have objectives which are set for us by parliament in statute and we are determined to deliver on those.”
Martin Wheatley stepped down from the role in September after George Osborne refused to renew his membership to the board. Since then, the FCA has made several decisions which has led to speculation it will not pursue banks as aggressively for bad behaviour.
Speaking on the programme, a barrister who deals with cases involving the financial services market and the FCA said the evidence ‘seems to support that the FCA are going back to a lighter touch’.
He said the abandonment of the review into bank culture and the decision not to take action against HSBC over its part in client tax evasion carried out in its Swiss division pointed to a change in regulatory enforcement.
McDermott said that the turnaround on the banking review did not mean it had changed its cultural focus but had decided an individual approach to banks rather than an thematic review of the entire industry was more appropriate.
Lewis argued this approach would keep the public in the dark over the findings of individual investigations but McDermott said notices would be issued if actions were taken against firms.
On the decision not to act against HSBC over tax evasion, McDemott said the regulator did not comment on individual cases.
McDermott has decided not to take up the role of chief executive permanently. She said it was a ‘personal decision’ explaining the role was not right for her at this point in her career.
Star Letter Extra – 08/01/2016
Osborne: Interest rate rise could be on the horizon
George is right – the Titanic is still sinking. It is essential to get government spending under control and stop the borrowing used to fund what we cannot afford. It is a real shame he did not have the courage to get rid of the tax credit system that is helping to bankrupt the UK.
I appreciate this may upset a few people but having a Base Rate at 0.5% has created a false economy. The Bank of England should have raised rates a few years ago so the level at today’s date would be 1.5 – 2%, but the powers that be were frightened. Now by having the Base Rate [low] for so long a generation has only experienced the artificial low and grown accustomed to living at this level, hence real future concerns on people’s ability to cope. A return to a proper level instead of the artificial low is required.
Osborne continues hunt for FCA CEO as McDermott declines job
Why should Osborne decide who is to lead the FCA? Surely, the role should be filled by an individual who will not roll over to any politician. Reading between the lines it appears that the bankers have been battered by Wheatley this past year. They have in turn put pressure on Osborne to [replace] him with someone who will play the game and let them trade as they wish.
Openwork reviews member fee-charging structure to fund IT spend – exclusive
It’s not the percentage they will retain from the fee that’s important. It’s the fact that they’re now taking a slice of a fee received. Once this has been accepted by advisers and industry, they will soon start to increase the percentage slice they take. It’s the same as councils that started to charge for town parking. Initially they introduced a nominal 50p to park all day. Two years later you go back to the same car park and it’s now £5 to park all day.
I have been considering leaving Openwork. If this is implemented it may make my decision a lot easier as I feel I am already paying them too much and not getting any value.
Osborne continues hunt for FCA CEO as McDermott declines job
Speaking on the BBC’s Radio 4 Today programme, Chancellor George Osborne described McDermott as a ‘very effective interim leader’ but said she didn’t want the job in the long term.
McDermott had been tipped as the front runner to take the top spot in reports earlier this week.
Osborne said the search continued for the ‘very best candidate’. Today presenter John Humphrys criticised Osborne for removing the former chief executive Martin Wheatley from his position and leaving the regulator leaderless.
Humphry said that Osborne had ousted the man ‘whom many bankers seriously feared’ and had given the banking sector a ‘free run’.
Wheatley resigned in July 2015 after Osborne refused to renew his FCA board membership beyond the end of January 2016. He stood down from his position in September with the frank disclosure that he was disappointed to be leaving the role.
Osborne said he did not accept that his decision to remove Wheatley had made life easier for the banks. He praised Wheatley for doing a good job setting up the FCA, but said the organisation needed new leadership as it entered its more mature phase.
The FCA’s move to drop its industry-wide enquiry into banks’ behaviour, a decision which emerged last month, in favour of an individual approach, has been described as ‘odd’ by Andrew Tyrie, chairman of the Treasury Select Committee.
Osborne said he had no foreknowledge that McDermott had decided to drop the banking probe and it was an independent decision taken by the regulator.
McDermott and chairman of the FCA John Griffith-Jones will now face questions on their decision to drop the probe when they stand before the committee.
FCA decides no formal action needed in HSBC tax affair
According to Sky News, the probe into tax affairs at HSBC’s Swiss private bank was concluded by the Financial Conduct Authority (FCA) several months ago, with the bank being notified of its decision at the time.
In an investigation carried out by BBC’s Panorama last year, the banking giant was reported to have helped rich clients dodge millions in UK taxation by hiding their assets in HSBC’s private arm in Switzerland.
Addressing the Treasury Select Committee following the revelations, former chief executive of the FCA Martin Wheatley said the regulator was ‘not aware’ of the allegations until they were published in the media.
Wheatley told MPs: “The allegations are about a Swiss unit of the bank, based on events of predominantly 2005-2007.
“We are very closely monitoring the ability of the bank overall … and we think significant improvements have been made.”
The news that the FCA has chosen not to take action on the matter comes shortly after it was revealed that it had decided to halt an industry-wide review of bank culture.
HSBC is currently evaluating whether to move its headquarters out of the UK, which it says is largely due to an increase in the bank levy as announced in the March Budget last year.
Reports in recent months have suggested that the US and Hong Kong are strong contenders for the new residency of HSBC’s head office.
FCA reshuffle sees Linda Woodall switch roles
Jonathan Davidson has taken up the role and will occupy a seat on the executive committee. Davidson previously held the post of chief operating officer for Direct Line and was a senior adviser to private equity and financial services firms.
Woodall will move to the role of director of life insurance and financial advice which does not rank among the executive committee members.
Acting FCA chief executive Tracey McDermott today announced Georgina Philippou as her final appointment to the executive committee. Philippou will become the regulator’s chief operating officer from November. She will leave the post of director of enforcement and market oversight and has over 20 years’ experience of regulation in the UK.
The executive committee now consists of:
• Acting chief executive officer: Tracey McDermott
• Chief operating officer: Georgina Philippou
• Director of enforcement and market oversight: Mark Steward
• Director of strategy and competition: Christopher Woolard
• Director of supervision – investment, wholesale and specialists: Megan Butler
• Director of supervision – retail and authorisations: Jonathan Davidson
• Director of risk and compliance oversight: Barbara Frohn
• General counsel: Sean Martin
Martin Wheatley resigned as chief executive in July following George Osborne’s refusal to renew the CEO’s membership to the board. He left the role in September. Speaking at the FCA’s annual public conference five days after the announcement, Wheatley said he was disappointed to be moving on and did so with a sense of unfinished business.