The BSA welcomes the publication of the guidance consultation and its intention to provide assistance to firms, in relation to dealing with forbearance and ensuring adequate reporting and provisioning of impaired accounts.
However, we have a number of concerns with the guidance, primarily with the overlap with conduct rules and the wider economic circumstances and influences on the use of forbearance by firms.
We are concerned that the guidance focuses on one forbearance solution being offered, when in reality a number of solutions may be applied to assist the customer during a period of financial stress. In addition, some customers will not migrate back to their original terms as the change to their circumstances is long term or permanent. The guidance fails to recognise this and infers that firms should seek to migrate all customers back to the original loan terms, once the payment difficulties are overcome. As such the guidance does not take account of the individual and varying nature of customer circumstances and does not provide sufficient flexibility.
We are concerned with the guidance on standards such as IAS39, that are currently under review and widely recognised as imperfect and would question what value the guidance is providing to firms in this respect.
We are also concerned that the guidance fails to take account of smaller firms, particularly in relation to the reporting guidance and accounting standards, where much of the guidance in our view, would be inappropriate. We recommend the FSA undertakes further analysis to ensure the guidance assists smaller firms and mutuals more generally.
Whilst we recognise the need for the FSA to publish greater clarity where they have found areas of concern, the intent and the timing of issuing guidance must result in providing assistance to firms. We do not agree that this guidance achieves this in its current state.
The BSA recommends that the FSA works to ensure the guidance works from a conduct and consumer protection perspective as well from a prudential view. As currently drafted the guidance does not achieve this and has the potential to cause consumer detriment, with firms not offering the options they have done in the past, as well as causing considerable confusion to firms.
The full response can be accessed via the link below:
BSA Response to the Guidance Consultation