This is a video blog about the ‘Standard Financial Statement’ or SFS which banks have you fill in if you contact them about being a ‘pre arrears’ case or if you go into mortgage arrears. We hope this helps demystify this piece of paperwork for you.
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.
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 …
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 …
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 …
Debt forgiveness & Writedowns, one in the same?
Below is a comment made by the Regulator at UCC while talking to a group of compliance officers.
“Reform of the bankruptcy regime could allow borrowers to earn a fresh start by discharging their debt over a reasonable period of time, Mr Elderfield said. However, he cautioned against debt forgiveness for the thousands of mortgage holders currently behind with payments on their loans.
Addressing compliance officers in Cork, he said it was understandable that some people wanted to go beyond rescheduling debt to consider some form of debt forgiveness.
“However, the cost of any support will need to be borne by the taxpayers or by the banks and therefore, in many cases, effectively the taxpayer as well, and this raises questions of fairness for taxpayers who are not in debt and, at a time of immense budgetary pressure, affordability for government finances.
“There is also the risk that any scheme would create perverse incentives and in fact make …
Why a borrower bailout is not likely
The EBS is on the block and there have been countless headlines regarding the idea that debts might get written down by Wilbur Ross if the Cardinal Capital group (who he is backing) are the successful bidder. I have said that I doubt this will happen and will set out why in this post.
EBS carried out a PCAR (prudential capital assessment requirement) test in March 2010, it showed that they required €875 million in funding to come up to scratch. Thus far they received €100m in cash from the state and a further €250m in a promissory note leaving a gap of €525m to fill. The bids being touted are in the region of €550m meaning that whoever buys in is effectively bridging the gap and paying a small premium as well.
Take a look at a balance sheet and you’ll see that no matter what happens, that in the end assets=liabilities. That is an accounting identity, in our example we have a hypothetical bank which has assets and liabilities worth (for example sake) €100 million Euro.
Central Bank Reform Bill 2010
We all want ‘tough regulation’, I would argue it doesn’t need to be tougher, rather it needs to be more pragmatic and enforced, and of those two criteria enforcement being the greater.
The Central Bank Reform Bill 2010 is going to give God powers to the Central Bank/Financial Services Authority of Ireland. Essentially it sets out a framework whereby they can call all of the shots, right down to how companies promote people.
In Part 3 s20(2) they can determine either by their interpretation of title or their interpretation of a persons role, whether they have any controlling function, and if so they require CB/FSAI authority in order to do their job, this is an additional layer of HR activity that will be injected into financial services companies.
Part 3 s35(i) states that a function requires pre-approval if the CB/FSAI deem it to be so on grounds of ‘size or complexity’, yet they don’t state any parameters for same, meaning a mom & pop shop could fall under these rigours based upon the …
Why banks support bangers
There have been headlines about the way that AIB underwrote certain loans to Liam Carroll, judge Peter Kelly is of the belief that the security may not be correct because AIB essentially gave him the money in early 2009 on the back of a personal guarantee and some other minor security.
Why would a bank do this? Especially as they were curtailing lending to every other sector of the market? Especially when they were being saved by the taxpayer and had just been bailed out? This isn’t to defend the banks, but to explain the reason why they acted in such a counter intuitive way, any right thinking person would be correct in assuming that they should have been trying to rein in developers, but that is the reverse of what they did, rather they extended more credit to the developer.
Explanation for this is simple, Carroll had brought AIB too far down the rabbit hole for them to turn around and pull the plug, a bank gets to a certain point with a …
Who is really to blame for the crisis?
Today, buried on the inner page of the Independent Business section there was an article stating that an Oireachtas committee found that the responsibility for the financial crisis in Ireland was largely down to regulators and ratings agencies (the same agencies who down-graded Irish debt in 09′).
Sadly, it didn’t make massive headlines, nor will it… If you could get a picture of Sean Fitz, or some scandal element to tag on then it would be everywhere, but the humble work of one of the few independent studies done on the matter, lacking sex-appeal & scandal will be widely ignored by the public, meaning everybody will still only see ‘banks’ as the source of the problem rather than as the conduit, when in fact the source of the problem was the gatekeeper, the person with their hand on the tap of the conduit, who allowed credit to flow too quickly for too long.
I had coffee with a well known economist last April and we spoke about this matter, he felt that it was …