Mortgage regulation definitions made by the Treasury and the regulatory regime proposed by the Financial Services Authority (FSA) will result in a large administrative and compliance burden being placed on brewers who make certain loans.
The reason behind this change is the Government's drive to bring greater regulation to the practice of making loans which are secured against an individual's residential property. While more mainstream mortgage lenders are well placed to deal with the new regulations, few will have realised the implications for the brewing industry.
Mike Maloney, a partner at business advisory firm KPMG, explained: "For years, it has been a standard trade practice for brewers to make loans to pub landlords to refurbish or upgrade their establishment. This loan is secured against the property itself. The new Treasury definitions and FSA rules will apply to all first charge loans made to individuals which are secured against a property of which at least 40% of the floorspace has a residential use. Obviously, this may cover a large number of pubs where the property includes an upstairs flat."
Once the new regulations are in effect, brewers will need to comply in much the same way as any other, more traditional, mortgage lender. This will include having appropriate amounts of capital behind the business, implementing sufficient levels of business controls and having senior management authorised by the FSA and following appropriate
