A strange contradiction, making a problem then complaining about it…

At the Central Bank conference on distressed property markets yesterday there was an excellent line up of speakers, the event was launched by the Governor who said that ‘Household financial distress is at unprecedented levels in Ireland as can be seen, for example, from the extraordinary rates of arrears on the servicing even of mortgages secured on owner-occupied homes‘.

That line is the one that made headlines, it was designed (intentionally or not) to make a point which various regulators keep making – that banks are not dealing with this problem.

So all we get from this is that mortgage arrears have miraculously gone to ‘extraordinary levels’ somehow and somebody needs to fix that… The justified rage being that we pre-capitalized the banks (recapitalizing would have necessitated the capital being used first not held to the bitter end) to the tune of €64bn.

Matthew Elderfield said it in March of last year, ‘time to face up to reality’. This was echoed in a talk given to the …

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Estate agents who may be unqualified?

Edel Morgan has an interesting article in the Irish Times today about estate agents having problems getting their licenses set up – the financial services industry went through the same set of issues nearly ten years ago. New forms, paperwork and bureaucracy always suffer teething problems but on the point below there is an obvious answer:

However one south Dublin estate agent, who declined to be named, said he is worried that he may not meet the requirements for licensing despite nearly 20 year’s experience. He was trading under his own name for less than three years prior to his application and the legislation says that sole traders or independent contractors need to show “evidence that the applicant was the holder of a licence or permit issued under the Auctioneers and House Agents Acts 1947 to 1973 for three of the five years immediately preceding the making of the application.”

In financial services there was a similar problem of people having a long established work record but lacking the specific qualifications that were developed for the …

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Are banks breaking rules by charging account fees?

“AIB will charge me for not having enough money in my account, apparently I can’t even afford to be broke.”

Regulation is a tricky area, it is a branch of law more than of finance and like law it is open to interpretation, precedent and individual cases.

So when I see Anne Fitzgerald of the NCA say that AIB is ‘breaking the rule that required it to act in the best interests of its customers’. I am concerned because it doesn’t present the context of the rule, rather it just makes a statement.

The actual rule being mentioned is Section 2.1 & 2.2 of the 2012 Consumer Protection Code. Chapter 2 in general covers consumer credit, payment services, and electronic money. The actual text of this section (2.1/2.2) is as follows:

“A regulated entity must ensure that in all its dealings with customers and within the context of its authorisation it that it (2.1)acts honestly, fairly and professionally in the best …

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Standard Financial Statement or SFS – for people in mortgage arrears

If you go into arrears on your mortgage or you talk to your lender because you believe you are a ‘pre-arrears’ candidate then you will be asked to fill in a ‘Standard Financial Statement‘ or SFS which is part of the Mortgage Arrears Resolution Process (MARP) which started last year.

Engaging with the lender is a key tenet of this and filling in the SFS and liaising with the lender on aspects of it. The information in this is what will be used to negotiate the repayment that you will pay in cases where lifestyle adjustment does not allow you to make the full payment.

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How it’s done in the USA (Bank Regulation)

There are often calls for stricter regulation, in particular the idea that in the US they arrest people in banks with greater ease/faster (which is in itself not ‘regulation’ it is policing). Anyway, I thought it was worth mentioning that in the US it isn’t a ‘one Regulator fits all’, and that the problems we had in the past through division of regulatory responsibility [splitting Central Bank and Regulator] still exist there.

Below is a graph of how responsibility is divided out in America.

As you can see, the OCC takes care of national banks, then the very popular state & community bank sector is elsewhere. Taking State banks in particular, they either have access to the Federal Reserve or not, if they do they are SMB and the State Authority and Fed are the regulators, if not then they are SNMB and the State Authority and the FDIC are the regulators.

That is why you hear about the FDIC ‘going into banks’ – these are state banks that …

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A Tobin tax worth considering.

The Tobin tax was a transaction tax first mooted in the 70’s, it was meant to be a tax that would reduce blatant speculation in currency markets.

The revived idea of a ‘financial transaction tax‘ is as flawed now as it was then, because it will likely hurt investment, reduce liquidity and institutions will pass on the cost to private individuals as was seen in the example of Sweden who implemented one for several years in the 80’s. .

However, there are issues in the current market which are distortionary and where a tax might aid the market and reduce volatility, I’m talking about algorithmic trading and high frequency trading. Much of the volume (on US exchanges estimated at c.60%) is not due to people making calls on the market, rather it is on computers that execute trades in short amounts of time, taking a minute …

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The issue with the case against ‘Reckless lending’

In operations I have two main roles, firstly is the obvious operational aspect of any company which has to do with logistics of loan suppliers and our distribution to clients as well as looking at the general business planning to ensure we are always at the best of our abilities. The other role is regulatory, I act as a compliance officer, while that is not a legal position, it is one in which the practical aspects of law surrounding financial services are to be found, how it works in real life.

On that basis I was surprised to see that there were several articles talking about the use of tort law to prove negligence in lending, and with that, a particular reference to the Consumer Protection Code (CPC) which has since been updated. While I admire the initiative being taken by New Beginning I have some doubts which I will express here.

One issue we have had with regulation is that it actually …

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