The FSA's plans to introduce a financial resource requirement for mortgage intermediaries will only ...
The FSA's plans to introduce a financial resource requirement for mortgage intermediaries will only add an unnecessary cost to the mortgage industry, argues the Mortgage Code Compliance Board.
Responding to the FSA's Consultation Paper CP174 - outlining the proposed prudential and other requirements for mortgage firms and insurance intermediaries – the MCCB shows concern over the costs of maintaining and reporting on such reforms.
According to the MCCB, this added requirement is not necessary, as most mortgage intermediaries do not hold client money.
And in most cases the compulsory PII and the membership of the Financial Services Compensation Scheme will work as an adequate safeguard for customers, MCCB adds.
The Board says the proposed requirement disregards what firms are already required to do under current regulatory requirements – such as the voluntary Mortgage Code and MCCB regime.
It also criticises the FSA for dismissing the concerns of firms about the costs and time spent in the application process itself as the majority of mortgage and insurance intermediaries will be new to FSA regulation.
These additional costs and the complexity of this proposal might leave many existing mortgage intermediaries to choose to act simply as 'introducers' to authorised lenders and intermediary firms in future, MCCB warns.
MCCB is also unclear on how this proposed requirement will work in practice.
The FSA neither put forward the costs of complying with this requirement in its Cost Benefits Analysis.
Nor are there any proposals to provide lenders with a database of authorised firms to enable them to check a firm's status and simplify the process.
But MCCB does not only hold criticism against the CP 174.
It both supports the FSA's proposals for compulsory Professional Indemnity Insurance (PII)as well as the view that the FSA's Principles for Business should apply unamended to regulated mortgage activities.
Also criticising the FSA's consultation paper is Investment & Life Assurance Group which says the "higher risk" proposals could have a huge impact in removing access to face to face advice for many low to middle earners.
"The proposals are flawed" says ILAG, and adds that for several reasons the products concerned might better be regarded as lower risk than other general insurance products.
On top of that, the Cost Benefit Analysis is based on an incomplete analysis of how the market might react if the "higher risk" proposal is adopted, ILAG adds.
Consider risk capacity
Via The Exchange
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