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| Version 9 | Version 10 |
|---|---|
| FSA sees credit squeeze on banks | FSA sees credit squeeze on banks |
| (about 3 hours later) | |
| The Financial Services Authority (FSA) has warned banks that the crisis in the financial markets will force them to change the way they do business. | The Financial Services Authority (FSA) has warned banks that the crisis in the financial markets will force them to change the way they do business. |
| Chief executive Hector Sants told the BBC that banks would no longer be able to raise as much money as before by selling their loans to other investors. | Chief executive Hector Sants told the BBC that banks would no longer be able to raise as much money as before by selling their loans to other investors. |
| This could permanently push up the cost of loans and mortgages and mean credit is harder to get for some customers. | This could permanently push up the cost of loans and mortgages and mean credit is harder to get for some customers. |
| Mr Sants said banks would have to keep more of their loans on their own books. | Mr Sants said banks would have to keep more of their loans on their own books. |
| Tightened lending | Tightened lending |
| Already, UK banks have been tightening up their lending criteria, with mortgage approvals down 31% compared to one year ago. | Already, UK banks have been tightening up their lending criteria, with mortgage approvals down 31% compared to one year ago. |
| Many banks are requiring customers to put down larger deposits before they can get loans to purchase a home. | Many banks are requiring customers to put down larger deposits before they can get loans to purchase a home. |
| In an exclusive interview with the BBC's Robert Peston, the FSA's chief executive said the crisis in global financial markets will require the banks to change. | In an exclusive interview with the BBC's Robert Peston, the FSA's chief executive said the crisis in global financial markets will require the banks to change. |
| "Banks themselves need to give consideration to how their business models will need to adapt to the changed market circumstances they have seen," said Mr Sants. | "Banks themselves need to give consideration to how their business models will need to adapt to the changed market circumstances they have seen," said Mr Sants. |
| Recent evidence of lenders tightening their belts The end of 125% mortgage deal offersThe market for 100% mortgages has shrunk significantlyCredit scoring criteria is stricter so only those with an almost spotless credit history are accepted for 0% credit card balance transfer dealsMortgage lender Nationwide this week announced rising interest rates for borrowers without a substantial deposit | Recent evidence of lenders tightening their belts The end of 125% mortgage deal offersThe market for 100% mortgages has shrunk significantlyCredit scoring criteria is stricter so only those with an almost spotless credit history are accepted for 0% credit card balance transfer dealsMortgage lender Nationwide this week announced rising interest rates for borrowers without a substantial deposit |
| "Secondly, we will be looking for firms to treat their customers fairly in these arguably more difficult times in prospect." | "Secondly, we will be looking for firms to treat their customers fairly in these arguably more difficult times in prospect." |
| Robert Peston said the implication of Mr Sants' position "will be a pretty steep reduction in the amount of credit available and an increase in the cost of it". | |
| HBOS, one of the UK's biggest banks said today it was taking a more cautious approach to lending. | HBOS, one of the UK's biggest banks said today it was taking a more cautious approach to lending. |
| It has reduced sales of unsecured loans in recent months which, "reflected our continued cautious approach and reduced appetite for such risk," it said. | It has reduced sales of unsecured loans in recent months which, "reflected our continued cautious approach and reduced appetite for such risk," it said. |
| Read the HBOS story in full | Read the HBOS story in full |
| Bonus questions | Bonus questions |
| There has been concern that the way bankers are rewarded has contributed to the credit crisis by encouraging short-term risk taking. | There has been concern that the way bankers are rewarded has contributed to the credit crisis by encouraging short-term risk taking. |
| His comments represent a sound ticking off for the City Robert Peston, BBC business editor Read Robert's blog | His comments represent a sound ticking off for the City Robert Peston, BBC business editor Read Robert's blog |
| Some shareholders feel bankers' bonuses should take into account the long-term consequences of their investment decisions, not just short-term results. | Some shareholders feel bankers' bonuses should take into account the long-term consequences of their investment decisions, not just short-term results. |
| "There is a risk that the remuneration structures are too short-term and they do incentivise behaviour which is not helpful in maintaining long-term financial stability," Hector Sants said. | "There is a risk that the remuneration structures are too short-term and they do incentivise behaviour which is not helpful in maintaining long-term financial stability," Hector Sants said. |
| Angela Knight, chief executive of the British Bankers' Association said shareholders had the opportunity to vote on the remuneration of senior executives in the banking industry. | Angela Knight, chief executive of the British Bankers' Association said shareholders had the opportunity to vote on the remuneration of senior executives in the banking industry. |
| "That key issue of ensuring remuneration is fair, that it is competitive in the international market, that it rewards the right behaviour, is clearly something that has been looked at by shareholders, the management and the FSA over a number of years," she told the BBC. | "That key issue of ensuring remuneration is fair, that it is competitive in the international market, that it rewards the right behaviour, is clearly something that has been looked at by shareholders, the management and the FSA over a number of years," she told the BBC. |
| Rock lessons | Rock lessons |
| Hector Sants also gave greater detail in his BBC interview on what he described as the FSA's unacceptable performance as the supervisor of Northern Rock. | Hector Sants also gave greater detail in his BBC interview on what he described as the FSA's unacceptable performance as the supervisor of Northern Rock. |
| HAVE YOUR SAYIt might help if the banking system was simplified by going back to its roots John, Mildenhall Send us your comments | |
| He said an internal review had shown that the FSA correctly identified the risks being run by Northern Rock - which borrowed the majority of its funds from the wholesale financial markets. | He said an internal review had shown that the FSA correctly identified the risks being run by Northern Rock - which borrowed the majority of its funds from the wholesale financial markets. |
| Yet Mr Sants said the FSA failed to communicate properly with the bank's management to force a reduction in those risks. | Yet Mr Sants said the FSA failed to communicate properly with the bank's management to force a reduction in those risks. |
| He insists that the review, which will be published in a few weeks, will be no whitewash. | He insists that the review, which will be published in a few weeks, will be no whitewash. |
| Mr Sants will also deliver this stark message to 300 banks and other financial institutions in a speech later on Wednesday. | Mr Sants will also deliver this stark message to 300 banks and other financial institutions in a speech later on Wednesday. |
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