Looking for scintillating letters of recommendation

Bob Hunt

March 11, 2020

BoE Money and Credit - mortgage approvals

Bob Hunt is chief executive of Paradigm Mortgage Services

If you’re Andrew Bailey, just about to start your stint as the new Governor of the Bank of England, and you’re looking for scintillating letters of recommendation then it would probably best to avoid the recent report published by the Treasury Committee into your tenure as chief executive of the FCA.

Indeed, if Bailey was hoping to skip over to Threadneedle Street with a roaring endorsement from MPs then he is likely to be seriously disappointed by the reaction he has got; the report expresses ‘serious concerns’ about the regulator (and Bailey’s time in charge) in particular its culture, transparency and the speed to which it works to address harm in the market.

On top of this, it also grilled Bailey about suggestions there was a culture of bullying and harassment at the FCA, a ‘record level of complaints’ from employees, and that it did not take the mental health concerns of its staff seriously.

You would be hard pressed to suggest therefore that Bailey leaves the regulator in a better place than he found it, although of course he has defended himself and his time at the helm.

Given the recent regulatory intervention in the mortgage market, it is interesting to read the thoughts of MPs on how the FCA addresses ‘harm’ and the speed (or otherwise) it moved in order to take action.

It has long been a complaint of the regulator that it is far too benign and reactive, rather than pre-empting issues before they arise.

In the mortgage industry at least, this approach to harm and what might increase or reduce potential harm is most pertinent given recent regulatory action. Indeed, there are many (including myself) who fear the most recent Policy Statement actually injects a far greater level of potential harm into the market than it proposes to take out.

There is always a lot of talk about minimising consumer detriment/harm so it has perhaps surprised us all to see the FCA pursue a course which might actually involve far greater risk for mortgage borrowers – notably encouraging an environment which might deliver more execution-only business.

Described last year as ‘inherently riskier’ than opting to take advice, you can’t help but wonder the thought processes that have gone into these rule changes, which quite blatantly, will mean that borrowers will be encouraged and pushed down execution-only channels where the likelihood of them choosing an inappropriate product will be greatly enhanced.

If we are to take the Treasury Committee’s report at face value, perhaps the FCA need to start preparing now for what might be an inevitable spike in the number of borrowers getting the wrong mortgage, and the subsequent increase in complaints.

The problem being of course that execution-only offers no protection to consumers in terms of either recourse to the Ombudsman or the Compensation Scheme. Until, of course, the former rules otherwise, and the industry ends up having to pay through the latter.

And, in other areas, perhaps most notably that of the plight of ‘mortgage prisoners’, can we truly say that the regulator has acted in the best interests of those consumers who are left unable to remortgage or secure a better rate, for no fault of their own?

Even the industry-led solutions that have been put forward are unlikely to help the vast majority of borrowers in such a position, and one isn’t able to see a forthcoming and wide-ranging solution that helps them in the near future either.

It’s a very sad period in the history of the mortgage market and one can’t help feel that with some foresight and some regulatory-backed action, it could have (for the most part) been completely unavoidable.

Andrew Bailey’s successor at the FCA, Christopher Woolard, is currently only the Interim Chief Executive, which might leave you wondering if he needs to prove himself and write some wrongs before being given the role permanently.

Certainly, he will need to secure far greater backing from the Select Committee than Baily has, and to that end, one might wonder (and perhaps hope) whether he is able to turn the ship around and tackle some of the key complaints made against his predecessor.

Whether that involves relooking at key policy areas and determining whether they truly meet the needs of consumers is up for debate. We can but hope. What we do however know is that Bailey’s influence over financial services and the UK economy has only grown. It will be interesting to see if he can shake off this criticism in his new role or if it comes to weigh heavily on him in the months ahead.

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