NEWS MMR
Cost/benefit analysis of MMR faulty, says FSCP
SAMUEL DALE
The Financial Services Authority’s cost/benefit analysis into the Mort - gage Market Review is seriously flawed, the Financial Services Con - su mer Panel claims. In its response to the final con -
sultation paper on the MMR, the FSCP has expressed reser vations as to whether the cost/benefit analysis could be relied on to guide policy. Its concerns include an in ade -
quate assessment of the knock-on effect of the MMR into other sectors such as private renting and house building.
It also criticises the lack of consideration of future mar - ket changes such as the intro - duction of capital require- ments, interest rate rises and changing attitudes to housing. The FSCP commissioned two
the world might change even in the absence of the regulation.” Stern agrees the analysis is not
robust and says the FSA ignored Treasury guidelines for impact assessments. His report states: “It does not
provide a robust and well-founded set of estimates of the impact of the proposed MMR responsible lending requirements on the retail housing market or on its partici - pants.” Richard Farr, director at
Telos Solutions, says FSA analyses have become a joke. He says: “It has lost credi -
RICHARD FARR FSA HAS LOST CREDIBILITY
bility but complaining about it will only delay the MMR. A cost-benefit analy sis on the impact for the housing market would be bigger than
the MMR itself.” Ray Boulger, senior technical
inde pendent peer reviews by econo - mist Jon Stern and Europe Econo - mics to assess the robustness of the FSA’s analysis. Both found major flaws and concluded it was not robust. Europe Economics criticises the
validity of the FSA focussing its analysis on 2009 and 2010 when there was huge market volatility. Its review states: “The well-being
analysis fails to be adequate, even in its own terms, in a key respect – namely that it does not involve a proper counterfactual evolution analysis. It does not consider how
manager at John Charcol, says it is difficult to assess the future market because of the unprecedented changes it has gone through. He says: “If you ask five econo -
mists what will happen in the next few years you will get 10 different answers so it is hard to make judgements.” The FSCP also called on the FSA
for rules to help mortgage prison - ers. It urges it to strengthen transit - ion arrange ments as it says many borrowers whose mort gages fall foul of the proposed rules will need help if they try to remortgage.
FSA totted up over 20 raids in 2011 REGULATION
The Financial Services Authority conducted more than 20 police dawn raids last year, according to law firm Reynolds Porter Chamberlain. The firm says the high number
of dawn raids is evidence of the FSA’s increased focus on more con - spicuous and heavy-handed enforce - ment exercises since the start of the credit crunch. RPC says the regulator averaged some six dawn raids each calendar year from 2005 to 2007. This increased after the credit crunch hit to an average of 29 dawn
MORTGAGE STRATEGY April 9, 2012
raids a year from 2008 to 2011. Steven Francis, regulatory part -
ner at RPC, says: “This shift in enforcement activity moves the FSA closer to the Securities and Ex - change Commission in the US, where enforcement of white collar criminal activity involves a heavy and visible police presence. “Most dawn raids relate to sus - pected insider dealing, which the FSA has been clamping down on following criticism for letting too much criminal activity continue unchecked.”
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