The discussions have led to concerns that the size of fines being considered by the regulator for those who step out of line will outstrip the funds currently put aside by some firms and networks.
Any increase in capital adequacy requirements would inevitably lead to greater consolidation as many small brokers, who have elected to remain independent and become directly authorised, seek the safety of a network and independent networks take shelter with large corporate backers.
Commenting on the news Matthew Bright, managing director of Optoma, said: “Only the FSA will know the size of the fines it intends to impose on brokers. Though if these reports prove to be correct then the industry should expect some hefty fines in the future.”
He added that any increase in capital adequacy requirements would lead to greater consolidation across the whole of the market.
FSA spokesperson Robin Gordon-Walker, said he could not comment on what may have been private conversations between the FSA and members of the industry.
He said: “I could not either rule in or out any increase of capital adequacy for mortgage intermediary firms.”
Sally Laker, managing director of Mortgage Intelligence, believed the FSA would have to consult with the industry before implementing any such action.
She said: “The regulator already has sufficient powers to place a firm under increased supervision if it believes the company to be financially fragile.”
Chris Cummings, director of the Association of Mortgage Intermediaries (AMI), said: “The primary objective of any increase in capital adequacy will be the actual product providers but inevitably these things then filter down to the intermediary. We would seek some kind of trade off regarding PI if there was to be an increase.”
Cummings also believed there would inevitably be greater consolidation as a result.
