Michael Coogan, director general of the Council of Mortgage Lenders (CML), said that this decision was one that his organisation and the mortgage industry believed would be the most logical and appropriate way for approaching statutory regulation. But, inevitably the Government’s change of heart means that the FSA’s final rules on mortgage regulation, which were due to be published this month, will be delayed and further consultation will be needed. It also means that N3 (the date on which the rules were due to come into effect) will not take place as planned at the of end of August 2002.
However, the CML firmly believes that the downside of the delay in implementing the new regime will be more than offset by the benefits of a true single regulatory system which should provide a long-term, sustainable system of regulation in which both the industry and consumers can have confidence. The CML will maintain the Mortgage Code in the interim period to ensure that lenders and intermediaries provide a high level of service and protection to their borrowers until the new statutory system comes into force.
Commenting on the Treasury’s u-turn, Coogan said: "We are delighted and relieved that the government has at last made the right decision about the best way forward for mortgage regulation. Better late than never. Although it means there will be some delay before the new system comes into force, the ultimate benefits will outweigh this inconvenience. In the meantime, the CML is committed to maintaining the Mortgage Code on a robust basis so that there can be an orderly, sensible transition to statutory regulation - whenever it comes into effect.
"There will now be a need for further FSA consultation and there will be much to do before the new system can take effect. The CML looks forward to working constructively with the FSA and with MCCB, which has done much good work in enforcing the existing Mortgage Code, to help shape the new system."
Just recently the CML had believed that the FSA might well modify its proposals for mortgage regulation and extend the date for N3 which is due to take effect in August. That view was based on what the FSA chairman had recently told the House of Commons Treasury Committee. Davies admitted that he was looking "very carefully" at suggestions made by the CML to reduce the expense and difficulty of mortgage regulation for lenders.
He said: "They argue that there are things in that regime which will be expensive for them to meet and difficult for them to meet." He then added: "We are pretty comfortable that there are some changes we can make to the detailed rules which will go some way towards meeting their particular concerns. Rules could probably be implemented in a smarter and a more cost-effective way."
Given those changes, he suggested that it would be appropriate for lenders to be given more time to prepare for the new regime. He did not actually put forward a new timetable for implementing the regulations but said: "I will commit myself to saying that we will not impose a regime which the industry does not think it can meet in the timetable."
In addition, he said that it was important to review the regulatory regime soon after it was implemented and that he would recommend this to the Treasury. "What we would need to do is look quite soon at whether the regime was delivering the kind of appropriate disclosure that we really need and improving people’s ability to make good decisions for themselves," he said. "If not, then regulating advice would need to come back on the agenda."
The announcement will also affect the sales of general insurance products and the role of the General Insurance Standards Council (GISC). In response to the announcement the GISC said that it would continue to enforce its self-regulatory regime for setting and maintaining good practice in the general insurance market until the role was officially taken over by the FSA.
Anthony Howland Jackson, chairman of GISC, said: "GISC offers a valuable opportunity for businesses selling and advising on insurance to develop a track record of regulatory compliance which will stand them in good stead when the time comes to seek FSA authorisation. While I am naturally disappointed that GISC in its present form will not continue indefinitely, I am confident that we will work very constructively with the FSA and continue to make a significant contribution to building an effective regulatory regime."
As a footnote to the developments regarding the selling of general insurance, the Insurance Intermediaries Directive (IID) - known in Europe as the Directive of Insurance Mediation - was agreed by the Internal Market Council of Ministers on 26 November. The IID will require member states to introduce regulation of persons conducting general insurance and reinsurance mediation. Once it has been agreed by the European Parliament and formally adopted, member states will have two years to implement the Directive.
