USP of short-term borrowing, namely speed of access to funds. To a fair degree the regulator has tempered its consultation with a view that recognises the service the short-term lending market provides. Therefore we are broadly in agreement with the main thrust of the proposals. For example, the question of being a lending source of last resort should definitely not be part of a modern industry. It is right that lenders should take a greater share of responsibility along with advisers to ensure that the lending scenario is robust and that an exit strategy has a basis in reality. Being a substitute for sub- prime non-status lending is not how the bridging industry wants to be labelled either and those lenders who tend to fly below the radar targeting this kind of lending need to be dissuaded from operating. I do think the regulator needs to look again at the whole issue of capital requirements because loans repay at any time and the very nature of the business means that money is recirculating all the time. Therefore using the same yardstick as for conventional lenders is not helpful. The regulator has already shown greater willingness to understand the issues surrounding bridging so far and I am hopeful that the final cut will be equally well thought through.
Christian Faes, director, Montello Finance
We are relatively indifferent to regulation. We are in talks with the FSA concerning
Montello becoming authorised however the reality is the vast majority of bridging finance will always fall outside of regulation.
www.mortgageintroducer.com
“Being a substitute for sub-prime non- status lending is not how the bridging industry wants to be labelled and those lenders who tend to fly below the radar targeting this kind of lending need to be dissuaded from operating”
The nature of bridging finance as far as we are concerned is that it should generally be concerning a commercial transaction. This is why the borrower can justify the premium associated with paying for a bridging loan. That is, there is a commercial justification for the loan. This will rarely involve the family home and hence not fall within the FSA’s jurisdiction. In a perfect world, there would be a carte blanche exclusion for loans that are for business purposes. In the papers between the ASTL and the FSA one of the questions that the FSA raised was whether an exclusion from regulation was appropriate for business lending. We would welcome such a sensible move from the FSA. In our meetings with the FSA it seems that they are some way from making any determination on this issue, however it is definitely something that they are thinking of. In any event when it comes to regulation, regulated bridging companies will bang the drum about how important regulation is. They need to justify the significant additional baggage that being regulated carries. However most successful bridging companies will be conducting themselves in a way which is akin to being a regulated business whether they are regulated or not.
Steven Nicholas, chief executive, Tiuta
The first proposal that needs to be reviewed is the complicated changes
relating to the capital adequacy requirements for those non-bank lenders, which includes bridging firms, operating in the regulated loan arena. The proposed increases appear arbitrary, excessive and (quite frankly) anti-competitive. The effect of an increase - potentially as high as 8% - subject to a range of factors and possible events which will require a complicated calculation on a continuous basis, appears to be extremely risk averse. To our mind this needs rethinking to establish a much simpler and workable solution. There is also the proposal which requires a regulated firm to assess affordability where an extension is requested. Again, this also appears excessive especially where a credible exit strategy for the borrower exists but may be delayed for genuine reasons. Assessing the exit strategy plan is realistic if the extension is a result of a failure in the exit plan. We believe that on-going monitoring
BRIDGING INTRODUCER MAY 2012 35
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