The last few days have seen the announcement of an immediate package of € 30bn from the Europe for injection directly into the Spanish Banks.
One of the areas the Spanish Government have had to agree to, to allow the rescue plan to move forward is the immediate transference of regulatory power from the Bank of Spain to the European Central Bank.
Some will argue this is a gradual but clear chipping away of sovereign power and the start of things to come.
At ground level the more immediate questions are what impact this will have on mortgage lending in Spain.
Mortgage lending and advice in Spain currently is unregulated. Any company or individual can without prior experience or knowledge offer mortgage advice. Consumer protection on miss selling is nonexistent and Banks themselves are able to sell product without any clear transparency upfront, add unnecessary and unrequired linked products and few generate legal and binding offers of lending prior to completion.
Whilst most of the issues facing the Banks currently relate to commercial or semi commercial lending, and whilst there has been a tightening of processes and criteria’s post the boom, as has been seen in many other countries the regulatory focus will probably focus on the requirement to be able to document and evidence what has been done rather than actually ensuring what happens is fair reasonable and of sound risk.
It can be expected that in the medium term mortgage advice will be regulated and some form of qualification required. This in itself is a step in the right direction as long as it is implemented in a sensible manner rather than just being some form of bureaucratic process as is very much the case in the UK.
One can but hope the regulator will look at all the practices implemented by the Banks in terms of lending by providing far more consumer protection, insisting on more transparency upfront, without yet again tying the Banks up to a point where the only safe thing to do is a reject an application in case the regulator questions why you have lent.
In the short term the Banks will be wary of lending until the dust settles so this extra liquidity will definitely not find its way into the credit markets. The money will be used instead to prop up balance sheets and allow Banks to stay solvent as the recession deepens.
International Mortgage Solutions