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News
News review
A look at the major issues of the month
by Nia Williams
T
he news that made the headlines this responsibility for what has happened by not hav- there is the greatest amount of uncertainty about
month has left me somewhat gobs- ing sufficient processes in place to protect our their future performance.
macked, it has to be said. money. “The Treasury protection will cover 90 per
cent of the credit losses which exceed this “first
First of all, we had Gordon Brown saying that MIG loss” amount, with each participating institution
lenders should no longer lend 100 per cent mort- One conversation I had this month was with retaining a further residual exposure of 10 per
gages to potential borrowers. 100 per cent mort- someone who asked why we didn’t bring the old cent of any credit losses exceeding this amount.
gages???! From my conversations with many of MIG premium back. It does make sense. The Both the “first loss” amount and the residual
you this month, you are finding it hard placing Mortgage Indemnity Gurarantee did just that exposure provide an appropriate incentive for
business where borrowers have a 20 per cent and protected lenders if they lent more than 75 participating institutions to endeavour to keep
deposit and meet lenders’ criterion! If any of you per cent LTV. Borrowers paid a one-off insurance losses to a minimum on those assets included in
do know any lender that is still providing 100 per premium and lenders could claim against the the Scheme…
cent mortgages then let me know and I’ll pass on cover should borrowers default and the property “Each applicant to the Scheme is required to
the details to everyone. There is the old saying wasn’t worth as much as they were owed. That
regarding horses bolting which I think is most sounds perfect – lenders are protected and bor- circle6
satisfy the Treasury that:
it is adequately capitalised and funded or has a
applicable here. rowers will be able to buy and sell as a result. Of realistic plan for accessing adequate
course, this depends on insurers playing ball as
Treasury Select Committee well! circle6
capital and funding;
iit has a sustainable business model and deliv-
This month we’ve also had the heads of various It got me thinking that more of you must
organisation parade in front of the Treasury have (polite!) opinions like this on what can be circle6
ery plan;
iits funding profile, sources and mix are
Select Committee. I had been hoping for tough done to help the industry. If you have, please
questioning on their companies’ risk assessment forward them to me at Nia@thepublishing- circle6
broad-based and sustainable; and
iits senior management team is credible, with
process but was disappointed. Instead all we got group.co.uk and I’ll publish them. Who knows, demonstrable ability to deliver its
were apologies, although none took the view that when I send Gordon Brown and Mr Darling business model and delivery plan.
they were to blame. In fairness, some weren’t to their personal copies of the magazine, they may “Each applicant's participation in the Scheme
blame for the situation we find ourselves in now take notice. will also be conditional upon the applicant com-
– or their banks for that matter. But some didn’t mitting to agreements to increase lending to
help. And I’d be sorry if I was able to retire at the New initative credit-worthy borrowers in a commercial man-
age of 50 on £650K a year! The announcement, as we were going to press, ner. They will report to Government on a
And then it was the FSA’s turn. I was left gobs- regarding the Treasury insuring banks against monthly basis on delivering on the commit-
macked again. The FSA basically admitted to the further losses is interesting. The plan aims “to ments. The Government will report annually on
Committee that they’d left banks to monitor remove the remaining obstacles to increased their delivery. Participation in the Scheme will
their own risk assessment scenarios and felt it bank lending and restore confidence to financial also be conditional upon the applicant giving the
was not the FSA’s place to challenge them. It was markets,” according to the Treasury. Treasury and its advisors access to information
obviously a major mistake. I find it quite incom- It says: “Under the Asset Protection Scheme, in required to assess the risk in relation to that
prehensible that the FSA can come down so return for a fee, the Treasury will provide to each applicant's assets, and its satisfaction of the eli-
strictly on financial advisers and yet ignore where participating institution protection against credit gibility criteria for protection under the
those advisers were going with their clients’ losses incurred on one or more portfolios of Scheme.”
money. I was obviously completely naïve to defined assets to the extent that credit losses At last someone is asking banks to prove
believe that banks were run properly and that it exceed a “first loss” amount to be borne by the adequate funding and the ability to deliver on
was safe to put my money into one. institution. its business model. It brings me back to the
It is unbelievable and the FSA must take some “The Scheme aims to target those assets where horse bolting.
March 2009 Mortgage Introducer www.mortgageintroducer.com
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