Regulation of mortgage advice and general insurance broking FSAs response to HMT statement

The FSA will now consult with all interested parties on the details of the new regulatory regimes so as to:

• introduce appropriate protection for consumers; and
• ensure that firms benefit from the resulting simplification in the regulatory arrangements.

Howard Davies, chairman of the FSA, said:

We recognise the merits of bringing both mortgage and general insurance brokers within the FSAs scope, providing a single regulator for such firms and greater protection for consumers. Smaller firms, in particular, have told us that the current mix of statutory and non-statutory regulation imposes extra costs and burdens on them. The requirements of the new regimes must be proportionate to the risks faced by consumers and ensure that the benefits of competition and innovation are retained.

The Government have said that they will consult on the timetable for implementation of the new regimes and expects that they will come into force simultaneously. We hope that voluntary industry arrangements will be retained in the meantime to provide protection to consumers, and we will work, in full consultation with all concerned, towards a smooth transition to the new regimes.

As a result of this announcement, the FSA will need to re-consult on mortgage regulation. Where still relevant, it will publish and take account of the results of its consumer research and responses to consultation paper CP98 (which set out the FSAs proposed regime to deliver mortgage regulation as originally required by the Government).

Notes for editors

1. The media can obtain copies of the HM Treasury announcement from the Treasury press office on 020 7270 5238 or from the internet: www.hm-treasury.gov.uk.

2. Prior to this announcement, the FSA was due to acquire responsibility for regulation of mortgage lending and mortgage administration from end-August 2002.

3. Currently, the vast majority of mortgage lenders and mortgage intermediaries are signatories to the voluntary Mortgage Code, where their compliance with that Code is overseen by the Mortgage Code Compliance Board (MCCB).

4. The Insurance Intermediaries Directive (IID) [known in Europe as the Directive of Insurance Mediation] was agreed by the Internal Market Council of Ministers on 26 November. The IID will require Member States to introduce regulation of persons conducting general insurance and reinsurance mediation. Once it has been agreed by the European Parliament and formally adopted, Member States will have two years to implement the Directive.

5. The General Insurance Standards Council (GISC) currently sets standards for the selling of general insurance products.

6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

7. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.