Compliance News - 23 September 2011

CC:ME WEEK ENDED 23 SEPTEMBER 2011

FSA EVENT: THE ROLE OF NON-EXECUTIVE DIRECTORS

FSA forum: The role of the non-executive directors in governance and risk management of UK subsidiaries of international banks is to be held 25 October 2011 at Merchant Taylors Hall, London.

This forum is aimed at engaging non-executive directors (NEDs) in a discussion with the FSA on their key areas of responsibility in relation to governance and risk management of the UK subsidiaries of international banks

Source: Financial Services Authority

FSA website

On 22 September 2011, the FSA board made changes to the Handbook in 10 instruments which:

• make minor administrative corrections to the Handbook, none of which represents any change in FSA policy (FSA 2011/48);

• clarify that common platform firms conducting investment services and activities from a branch in another Member State are subject to the Host State’s requirements for those investment services and activities for the purpose of article 13(2) of MiFID and the MiFID implementing Directive (FSA 2011/49);

• amend the list of appropriate qualifications for advisers in the Training and Competence sourcebook and provide a list of accredited bodies which issue annual statements of professional standing to advisers (FSA 2011/50);

• remove the use of non-EEA rules in calculating group capital requirements (FSA 2011/51);

• amend the liquidity rules and guidance, including a widening of the qualifying criteria for low frequency liquidity reporting and an extension to the transitional period for former mismatch firms (FSA 2011/52);

• amend the guidance on the promotion of products or services which are described as ‘guaranteed’, ‘protected’ or ‘secure’ (FSA 2011/53);

• amend provisions relating to custody liens and title transfer collateral arrangements in the Client Assets sourcebook (FSA 2011/56);

• make a minor rule amendment relating to reporting, and centralise the collection of written reports to the FSA (FSA 2011/57);

• amend various data items and guidance in order to clarify existing reporting requirements (FSA 2011/59); and
• enable corporate trustees of occupational pension schemes to claim on the Financial Services Compensation Scheme should a life insurer fail (FSA 2011/61).

These instruments are all listed in Annex A of notice 113. Instruments FSA 2011/54, FSA 2011/55 and FSA 2011/58 have also been made by the Board but will be published at a later date. They will be summarised in the November Handbook Notice.

Source: Financial Services Authority

FSA website

CML: MARKET COMMENTARY SEPTEMBER 2011

UK economic prospects appear closely tied to how effectively eurozone policy-makers resolve Greece’s sovereign debt problems over the coming months.

Over the coming months, we may see renewed quantitative easing in a number of major developed economies, including the UK, in an effort to cushion slower economic growth.

Once seasonal factors are stripped away, the underlying position for the housing and mortgage markets is broadly stable, but with subdued levels of activity and downside vulnerability to bad economic news.

Source: Council of Mortgage Lenders

CML Website

CML: ASSISTED VOLUNTARY SALES AND OTHER EXITS FROM HOME OWNERSHIP 

The CML welcome publication last week of a report by the National Homelessness Advice Service and the housing charity Shelter on the potential of assisted voluntary sales (sometimes abbreviated to AVS) to act as an alternative to mortgage possession. The report, researched by the University of York, examines the potential of AVS as a means by which borrowers could opt to move out of home-ownership and into other forms of tenure in the right circumstances.

Lenders have always been able to support borrowers who wish to sell their property, rather than going through the process of mortgage possession. The research, to which the CML and individual lenders provided input, outlined some of the ways that firms can assist. In analysing the potential of AVS, the report observed that:

• Deciding that a mortgage is unsustainable is extremely difficult for borrowers. Lenders and advisers both have a role to play in helping them understand the circumstances they find themselves in, and their options, and this can influence how the borrower may eventually leave home-ownership.

• Lenders approach AVS differently, with criteria for and acceptance on to schemes varying greatly between firms. This is partly because AVS is not yet a fully developed concept or standard market practice, and partly because the profile of customers in arrears varies from one lender to another. In the absence of an established model of AVS, its potential to deliver benefits to lenders and borrowers has not been properly assessed. The report says that lenders need a clearer understanding of the regulatory, reputational and commercial implications of AVS.

• Borrower awareness of alternatives to possession is minimal. If borrowers do not understand their options in dealing with mortgage payment problems, they may not make the decisions best suited to their circumstances. Some could have benefitted from knowing about the potential of AVS earlier in the process.

• Once they understand AVS, borrowers in difficulty are generally attracted to the concept. Knowing that they could get help from lenders with barriers to selling their property, such as upfront costs and fees, and support during the process could lead to more widespread use of AVS. But lenders are concerned about managing the expectations of borrowers on how much support they can offer.

• Borrowers with mortgage payment difficulties worry not only about their debt but also about their future housing choices should their arrears become unsustainable. AVS could become more attractive to borrowers if they understood they would get support and advice from lenders, advice agencies and local authorities to help them into alternative forms of housing.

• Local authorities may deem borrowers to have made themselves intentionally homeless if they voluntarily relinquish their property, and therefore no longer entitled to housing assistance. But recourse to AVS should not be seen in this way, and borrowers in this predicament should be entitled to the same support as those going through mortgage possession.

The CML supports the use of AVS as a means of leaving home-ownership in the right circumstances. Lenders now need to reflect on whether a structured AVS offering should sit alongside their other options for dealing with borrowers in difficulty. The report suggests that AVS has the potential to deliver better outcomes for borrowers and lenders than possession in some circumstances. But more work needs to be done before this approach can begin to be a more widely used alternative.

Source: Council of Mortgage Lenders

CML Website

« Back