Speaking at the Association of Mortgage Intermediaries’ (AMI) annual dinner, Sir Callum McCarthy, chairman of the FSA, said that while a balance was needed between rules and principles so that rules were respected, a principle-based approach would be better for both the industry and the regulator.
McCarthy said: “Greater reliance on principles will reduce the risk that regulation inhibits innovation and will reduce the sheer bafflement induced by a rulebook of more than 8,000 pages. It will concentrate attention on what really matters and it will make managers in financial services firms think through the real issues rather than reach for the rulebook, or for whoever advises them on the rule book.”
The position was backed by AMI and Jon Gummer MP, chairman of AMI, explained that brokers didn’t want to feel constrained by regulation.
Gummer said: “We want to face the issue of the contrast between principles and rules. This has created, what I call, regulatory indigestion. At the moment we have 8,000 pages of rules when what we want is clear principles to which we all adhere. And the trouble with having rules is, if you are not careful, they are used to guard the backs of the jobs-worths in the property industry.”
Bill Warren, director of Complete Mortgage and Loans Service, said: “I know where the FSA is coming from as it is trying to recognise brokers want more control running their business. I believe the medium and large intermediary organisations like principles as they have the compliance structure, so they are competent enough to interpret it. It will be harder for small brokers though, as they can’t afford compliance officers and rely on themselves. They may find that uncomfortable and want the rules to tell them what they are doing.”
