UK PRA and FCA Publish Final Policy on Implementing the FPC's LTI Ratios
On October 1, the Prudential Regulation Authority (PRA) issued PS9/14 and the FCA published FG14/8 setting out their final policies on implementing the Financial Policy Committee's (FPC) recommendation on loan to income (LTI) ratios in mortgage lending.
The policies were published after the FPC noted that acting against the excessive indebtedness caused by a high number of mortgages with high LTI ratios will make the financial system more stable.
The FPC made its recommendation on LTI ratios in June. The FPC recommended that the PRA and the FCA should ensure that mortgage lenders limit the proportion of mortgages at LTI multiples of 4.5 and above to no more than 15% of their new residential mortgages. The final policies of the PRA and FCA include permitting the application of the LTI limit to be at a group level rather than at the level of each regulated entity. PRA Policy Statement. FCA Finalized Guidance.
Findings from ICO Visits to Credit Reference Agencies
On September 30, the UK Information Commissioner's Office (ICO) published a review of the manner in which personal data is processed by credit reference agencies (CRAs).
Although the report focuses on CRAs, the ICO states that the issues highlighted are equally relevant to other organizations processing large amounts of personal data and to lenders who share information with CRAs.
The report identified certain areas that could be improved, including implementing a process to remind organizations supplying data to CRAs of their obligations under the Data Protection Act 1998, and a system to ensure that all CRAs' clients are audited at least once a year.
The appendices to the report provide advice for firms relating to each of the topics covered by the report including training, staff awareness, data sharing, monitoring and reporting issues and information risk management. Report.
UK FCA Policy Statement on Sponsor Competence and Consultations on Joint Sponsors and Sponsor Conflicts
On September 26, the Financial Conduct Authority (FCA) published consultation paper CP14/21, incorporating its policy statement CP14/02 (sponsor competence) and other changes into the Listing Rules and Prospectus Rules. CP14/21 also includes details of a consultation on joint sponsors and invited views on sponsor conflicts.
The main change is that the FCA has removed the competency framework against which sponsors should assess themselves. LR 8.6.12R(9) now requires sponsors to have effective systems and controls for compliance with each of the five competencies found in LR 8.6.7R(2)(b).
The amendments to LR 8, LR 11 and Appendix 1.1 of LR, set out in the Listing Rules (Sponsors) (Amendment No 5) Instrument 2014 (FCA 2014/54) come into force on February 1, 2015. Amendments to LR 5 and LR13, together with the changes to the Prospectus Rules, each set out in that same instrument, come into force on October 1. Consultation Paper.
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