"We got it wrong," says FSA
The Financial Services Authority (FSA) should have acted more quickly in the advent of the banking crisis and has been guilty of supervising some of the larger firms 'on the cheap', according to one of its divisional heads.
That was the assessment given by Jeremy Heales, head of insurance and assessment for the small firms and contact division of the regulator, speaking at the British Insurance Brokers' Association conference.
When questioned about the FSA's failure to identify the warning signs of the current economic crisis, Heales said, during a morning panel debate, that the regulator had made errors: "We've made it very clear. We got it wrong and we need to act differently. With the Northern Rock debacle we didn't do well, we need to improve."
Heales admitted that the FSA needs to keep a closer eye on larger institutions and engage more with smaller firms in the future. He said that he hoped to start building a new regulatory model by working with the industry. In order to pursue this, he urged insurers and brokers to share their concerns with the authority.
Heales' remarks came about as Jon Pain, managing director at the FSA, said that the regulator will look at changing its rules for verifying mortgage applications. He said: "We have found substantive evidence of irresponsible lending and inadequate affordability assessment.
"We will ask whether we should change our rules to require income verification for all mortgages, with lenders required to verify the plausibility and authenticity of the documentation by the customer before an offer is made."