Many moons ago, when I graduated from University, I came to a metaphorical fork in the road with two options open to me. Should I end my days of tax dodging, get a ‘proper job’ and begin paying off my student debt or should I continue to sponge off the state and my parents while using my final year’s student loan to go travelling? I mulled this over for a full five seconds before booking my plane ticket to Australia.
Down Under I saw the sights and met some interesting characters. During an organised three-day trip to Uluru (Ayers Rock for the philistines out there) I bumped into a fellow traveller from Germany. He was called Andreas and was a slightly disturbing character; he had a penchant for uncooked kangaroo meat and his views on our fellow female travellers were just as ‘raw’ – even for Mortgage Introducer.
Anyway, over the course of the trip we discussed many topics including Britain’s view of Europe as a whole and our place within the continent politically. I tried to explain that very few Brits considered themselves European and we tended to view Europe as ‘them’ instead of ‘us’. Andreas was bewildered by this and pointed to the huge influence the European Commission, and everything it does, has on our country. When we parted company he said, with a slight air of menace, “Maybe one day I will come to this country, which is in Europe but doesn’t want to be part of it.” Ever since that day, the thought of Andreas roaming our fair isle has been enough for me to take the issue of European politics and regulation seriously. And so should mortgage intermediaries.
Taking Europe seriously
It has been said before, but is worth repeating, that a large part of AMI’s lobbying work is now focused on the Commission. Its influence on UK financial services continues to increase and it is vitally important that we, as a trade association, shape the content of the directives coming out of Brussels and ensure that, at a European level, the decision-takers are aware of the UK’s mortgage intermediary sector, its influence and the possible impact of European regulation. This is the job AMI is performing for its members.
To give our members information on the European legislative process, and the current initiatives which could affect them, AMI has recently published a factsheet entitled, ‘A Guide to European Financial Services Legislation’. The factsheet also provides information on the major European institutions, such as the Commission, the directorate-generals, and the Parliament, and those specialist institutions involved in producing and implementing European directives such as the European Securities Committee and the European Banking Committee.
Intermediary impact
Of course the interesting parts of the factsheet focus on those directives which do, or could, affect mortgage intermediaries. We’ve already seen the Commission turn its attention to mortgages (first and second charges) with its Mortgage Credit Green Paper, which will be followed by the White Paper early next year. Currently, there are two existing directives which could have an impact on the work of mortgage intermediaries. They are:
the Markets in Financial Instruments Directive (MiFID). This directive will be implemented in 2007 and will impact on all IFAs despite the fact that the majority will not be directly in its scope. The directive itself covers many areas including: conduct of business, suitability, Financial Promotions, record-keeping, complaints handling, training and competence, client classification and client money rules. Its implementation is a key priority for the Financial Services Authority (FSA). Some of these changes could also be rolled-across to mortgage broker firms given that any changes the FSA makes at a Conduct of Business (COB) sourcebook level could filter down to both MCOB and ICOB. AMI is following the implementation plans closely to assess the impact of any changes to the mortgage regulatory regime.
The Consumer Credit Directive (CCD). This originally included certain types of secured lending and we are currently following developments to ensure this remains the case. Although the CCD currently excludes all loans secured on property, it does address some important issues for brokers such as the calculation of the APR, the definition of credit intermediary, and the role of advice. The wording of the CCD has yet to be finalised, however this could affect the contents of the Mortgage Credit White Paper and consequently how mortgage lending is regulated at a European level.
Other pieces of European legislation which could also affect mortgage intermediaries include:
Solvency 2 – sets out stricter solvency requirements for insurance companies to protect policy holders.
Third Money Laundering Directive – introduces a new regime for customer due diligence.
Unfair Commercial Practices Directive – currently being consulted on by the government and will require some technical changes to COB.
Equal Treatment Directive – concerns the access to the supply of good and services.
Deposit Guarantee Scheme – legislation in this area could affect how the Financial Services Compensation Scheme (FSCS) is financed and operates.
As you can see, there is plenty on the European agenda. We are engaged with these directives and feed into their construction and implementation. The AMI factsheet gives members an introduction on the process and its content. I would advise all brokers to be aware of what may be coming to UK shores in the very near future.
AMI members can download the factsheet from the AMI website.
