Nationwide: Regulation threatens consumers
Speaking at today’s Council of Mortgage Lenders’ future housing conference in London Green said: “Money invested into implementing regulation is money that will not be going into innovation, making cheaper products, not be going into what we want to do which is making a consumer’s life easier.
“Innovation by default is also risky and regulators don’t like failure. If you innovate, you have to accept that you may fail, however in a heavily regulated environment a regulator will come down on you hard if you do fail reducing the incentives to innovate. Regulation is also designed for the existing market and not a future one.”
Green added that now was not the time to implement multi-million swathes of regulation, the industry needed to get through the current economic strains such as the threats from Europe.
“There is a lack of funding and a risk of a double dip. Now is not the time to implement regulation when the market could look very different in seven years time,” Green said.
“Regulators need to be accountable for the decisions they make.”
He continued to discuss the impact analysis of regulation and how each analysis looked at individual rafts of reforms. When compounded together, there was a real risk that there would be a sever over-regulation of the industry.
He said: “The new regulator needs to understand that they shouldn’t fit a market to the regulation they want to implement. They have to fit a customer’s needs. I ask them one question: Have you ever phoned a mortgage lender and tried to get a mortgage? The amount of documents which needs to be mentioned verbatim is quite large. So much so that it will turn off consumers. Regulators need to understand what the customers’ needs are.
“We would like regulators to get rid of a lot of those texts. Those discussions are appropriate for high risk scenarios but not all.
“It is imperative that regulators get things right, otherwise lenders will begin to restrict their lending to anyone but the most prime customers which will lead to a two-tier market.”
A delegate at the conference asked whether as an industry we should actually be having more conservative views on the basis of past issues with self-cert and sub-prime lending.
Green responded: “There certainly was irresponsible lending but I would argue that that was due to a lack of wholesale funding due to issues in America performing insanely irresponsible levels of lending.
“If you look at our non-income verified portfolio, it actually outperformed the income verified by wide and this can be seen with both Nationwide and HSBC.
“Arrears would have been a lot less than what it would’ve been if there wasn’t a shortage of wholesale funding. It’s not the quality of lending that was the issue.
“Self-cert should certainly not be reintroduced but is that an argument that we should ban fast track? We need to see innovation in order to find a gap in a two-tier market.”