Tuesday, 17 March 2009

Has the FSA ever been ahead of the game?

Pension mis-selling.
Millions were advised to either transfer their company pensions to persoanl pensions or advised not to join their company pensions, opting instead for a personal pension. Went on for about 10 years before the regulator (The PIA at the time I think) acted.

Endowment mis-selling
Taking an endowment policy to repay a mortgage and the adviser not explaining that there was a risk the maturity would not be sufficient to repay the mortgage. Went on for about 15 years before the FSA acted.

Split cap investments
These risky investments were branded as safe by companies with the FSA approval. Went on for around 5 years before the FSA acted.

Northern Rock
Approved Northern Rock's business plan shortly before the company failed, causing the first run on a bank in 150 years.

General banking markets
FSA looked the other way as UK banks took on liabilities greater than the economy before near collapsing and bringing down the UK economy.

Mortgages - split into 3 sections

Over lending
Borrowing more than 3 times your income in some cases up to 6 times your income. Allowed house prices to soar out of control. Went on for 9 years. Apparently FSA is acting now.

Liar Loans and SELF CERT
Borrowers encouraged to inflate their income to obtain a larger loan than would otherwise be available. Lenders do not check the income and encourage mortgage brokers to falsify the income to get business. Despite being warned in 2003 they have still not acted.

No mortgage repayment plan
Borrowers only pay the interest on the mortgage to make it more affordable and have no way of repaying the mortgage. FSA has not acted.

The FSA seems to follow the rule that says - let the problem raise it's head, let the problem develop, let the problem grow, announce a review and fine the providers and partially compensate those losing out. Unless it is the banks of course, then they get £1 trillion for their trouble.

Any other examples?

1 comment:

Fidothedog said...

The FSA could not regulate a bowl movement in a toilet.