01 September 2015

Amanda Hartshorne

Amanda Hartshorne - Tieto

4Posts 13,936Views 0Comments

Financial Services Regulation

This network is for financial professionals interested in staying up to date on financial services regulation happening anywhere in the world. CFOs, bankers, fund managers, treasurers welcome.

For-bearance or against it?

30 November 2011  |  3540 views  |  0

So what actually are the FSA after then?  Do they want firms to treat their ‘customers fairly’ when in times of temporary financial shortages, or do they want lenders and administrators to be more transparent to them when reporting residential mortgage arrears and shortfall figures?  Read between the lines of the FSA’s latest guidance paper on ‘Forbearance and Impairment Provisions – Mortgages’ you could be forgiven for wondering: in whose interests has the guidance been written.

Whereas the guidance is laudable, the best practice suggestions are surely what most responsible lenders carry out now, isn’t it? So what the FSA are really asking for is more information from firms on what the true position is with regards to the lenders risk of exposure to arrears and borrowers going into default.

Pre-arrears or potential impairment indicators can be easy to identify and actioned if lenders have the relevant system triggers and sophisticated workflow, but what should they do once they’ve identified the poor consumer who may be demonstrating the early onslaught of ‘household poverty’? 

Well, various reviews have been undertaken by the FSA around arrears and responsible lending and this latest guidance highlights many of their concerns around how forbearance measures are monitored and reported. 

One of the main areas of concern is with regards to short term switches from Capital and Interest (C&I) to an Interest-only repayment type mortgage.  If the lender has done this to enable a borrower to cope during times of financial stress, the FSA still want the lender to accrue an arrears figure against the mortgage which equates to the difference between the interest they are currently paying and what they should have paid on a C&I basis.  Apparently the current practice of trying to protect the borrower’s credit rating by not reporting they are in arrears has got to stop. The FSA have been suggesting for a while that the arrears figures being reported by lenders aren’t quite what they’ve expected during a recession, now they’ve sussed out why and want lenders to continue with their practice of carrying out forbearance measures, but make sure they report the true figure!

Even though, all the way through this guidance, the FSA state that they want firms to review their reporting and disclosure of impairment indicators it’s not until the end that they state that regulatory reporting requirements in relation to forbearance activities will be considered separately.  I’m not a betting person, but if I were I’d bet that the next requirement they introduce in this area is specific reporting criteria for how firms identify potential impairment cases and what they do once they are managing them as such.

TagsRisk & regulationRetail banking

Comments: (0)

Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Latest posts from Amanda

For-bearance or against it?

30 November 2011  |  3540 views  |  0  |  Recommends 0 TagsRisk & regulationRetail bankingGroupFinancial Services Regulation

Light up the sky with rocket propelled mortgage legislation

04 November 2011  |  2397 views  |  0  |  Recommends 0

'Dangerous' liaisons

25 October 2011  |  3198 views  |  0  |  Recommends 0

The DPA more than an Act, it's a way of life

21 October 2011  |  4802 views  |  0  |  Recommends 0 TagsSecurityRetail banking

Amanda's profile

job title Principal Compliance Consultant
location Leeds
member since 2011
Summary profile See full profile »
I use my unique expertise to help financial service firms interpret and implement new rules and legislation by translating compliance regulations into recommendations for workable solutions.

Amanda's expertise

What Amanda reads
Amanda writes about
Amanda's blog archive
2011 (4)

Who's commenting on Amanda's posts