The Lead Taker: Regulation spreads its tenticles

Regulation spreads its tenticles

Plus ça change! The more things change, the more they stay the same! Or perhaps instead they get just a little bit worse!.

How I would like to be talking to you about things that are on my mind, other than the same old story about regulation! Indeed this month I have even started writing articles on other subjects but have had to abandon them because of bargeloads of stories about regulation floating past my line of vision and demanding comment. So here we go again, at least no one will be able to say that we were not informed!

Take, for instance, the latest piece of regulation, the EU’s Mortgage Directive. This proposes Europe-wide regulation of credit re residential properties and concentrates on consumer protection through disclosure and intermediary registration.

The practical implications of this Directive are that, in order to provide advice, the individual broker may have to know not only his own home market but also appropriate lenders, their mortgage rates, and the exchange rate balance in over 27 “relevant” countries.

What is more, the Directive is even spreading its tentacles beyond the residential mortgage market into the areas of bridging and Buy to Let, meaning that these too will turn into regulated activities.

Some commentators have suggested that the EU Directive could be the best thing for the industry since sliced bread, but I don’t personally believe a word of it. For a start, the EU is not looking to create an even or a fair playing field. It is looking to create a homogenised one, where the colour is beige and mediocrity reigns. Few people have ever claimed that the EU’s regulators are captains of innovation.

It seems that very few people, including the CML, think that the EU Mortgage Directive in its current form is workable. It will make the UK uncompetitive, especially if the FSA decides to enshrine it in their rule book.

Returning to the ever popular theme of the FSA, I was interested to read recently that Labour MP George Mudie has called the organisation immature and insecure and has claimed that the MMR is damaging the housing market, with a particularly disastrous impact on first-time buyers. He accused the FSA of working in a vacuum without regard to the social and economic impact of its decisions.


It is hard to find objective figures for the losses that this recession has brought to us as the domestic and commercial finance industry, but one thing is certain. Those losses have been substantial.

On the domestic front, figures quoted to me recently stated that over 15,000 firms existed before the economic crisis and that this number is now down to as few as 8,000 and could realistically pancake to 5,000. All of this has happened with hardly a comment from central government.

Granted, we make up a small amount of the economy in terms of revenue. However, we make a huge impact in terms of providing consumer choice in the important area of finance. Much of this choice is being removed from the marketplace and it is unlikely to regenerate when the market begins to return leaving most of the market place unable to afford advice and service if it’s still available.

If you couple the impact of MMR, (which George Mudie claimed that most MPs probably think is a vaccination), with generally tougher regulation, and add this to the EU Mortgage Directive, you could be forgiven for asking whether anyone will be left to give any advice and choice to the consumer.

As I have said in previous articles, we should be looking for a controlled approach to the markets, allowing and encouraging them to recover. Instead of this, what is happening is that the half-drowned shipwreck victim is being bludgeoned before he is able to crawl up the beach and take a breath of fresh air. His ship has foundered on the rocks of recession and he has been half-drowned in the sea of economic misery, but does he get any support to get back on his feet? Far from it.

Is it just me or is this all going to end in tears? Is there nobody out there listening? Like George Mudie, I implore you, if you are a reader of these articles, to start beating a path to the door of your UK MP and your Euro MP.

I am afraid that we get the government we deserve, and we cannot blame them for coming up with disastrous legislation when they do not get to hear the story from the grass roots and are instead being led by people who have a vested interest and who are more interested in control and interference than in beneficial regulation. It is up to us to stop complaining amongst ourselves and to make our elected representatives sit up and take note. This is how change for the better comes about.

I have recently penned a letter to my own MP & Euro MP so I will let you know how I get on.

Do you agree? Disagree? Send your comments to

[email protected], who will pass them on to me.

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