FSA Mortgage Lender Clampdown

FSA Mortgage Lender Clampdown

Mortgage lenders could soon be subject to biannual visits from the Financial Services Authority.  Lenders classed a high impact firms may be subject to regular meetings if the FSA implements recommendations in its report on the Northern Rock affair.

The report, published last week finds that the regulator failed to pick up on several early warning signs in the Northern Rock saga, including Northern Rock breaching its capital requirements as early as March 2007.  

It also states that the FSA was alerted to risks related to Northern Rock’s imbalanced business model in 2006.  The report calls for regular analyses to consider prominent firms’ management performance, strategic plans, business models and liquidity.

Our view

High impact damage firms such as mortgage lenders should be monitored much more closely than many other financial services firms in view of the potential damage that can cause to both the market and investors.  Northern Rock was a classic example of a high impact firm that needed closer monitoring.

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