Bloomberg News

FSA Says It Repeatedly Warned Mutual Lenders on Loans

April 17, 2009

April 17 (Bloomberg) --The U.K. market regulator “repeatedly warned” British mutual mortgage lenders, known as “building societies” about the quality of their loan books.

Financial Services Authority Chairman Adair Turner said that over the last six years the agency has sent letters and given speeches highlighting the importance of asset quality at building societies.

“The FSA has repeatedly warned the building society sector of the importance of maintaining asset quality, with a particular focus on non-traditional lending,” he said in a letter published on the FSA’s Web site.

Turner’s comments came in response to U.K. Chancellor Alistair Darling’s questions about Dunfermline Building Society, which was bought by Nationwide Building Society as part of a government-backed rescue. U.K. lawmaker Vince Cable yesterday asked the FSA to investigate claims by a former worker that the regulator’s management had ignored warnings about the mutual banks.

The regulator in March 2003 sent a letter to building societies warning them of the dangers and risks of commercial property lending, Turner said. In May 2004, the then chief executive officer of the FSA gave a speech to the Building Society Association warning that some lenders hadn’t properly assessed the risks of sub-prime and self-certified mortgages.

In 2007 the FSA told building societies to stop buying non- prime assets, and in May, current CEO Hector Sants gave a speech in which he said the sector had a “poor understanding” of its exposure to commercial borrowers, Turner said.

To contact the reporter on this story: James Lumley in London at

To contact the editor responsible for this story: Anthony Aarons at

The Aging of Abercrombie & Fitch
blog comments powered by Disqus