Clive Briault

In a speech to the Council of Mortgage Lenders’ Annual Conference, Clive Briault, the FSA’s Retail Managing Director, said that he expected lenders to have clear strategies – with appropriate stress testing - that would take account of the changing world. They needed viable funding models and educated boards and senior management.

Briault said "There is a very real prospect that conditions will worsen further into next year, in terms of both liquidity and credit risks. Firms should therefore be assessing their funding and liquidity positions; undertaking robust stress testing to reflect current and prospective market conditions; reviewing and assessing their medium and longer term strategies and the options open to them; and considering contingency plans against the worst outcomes.”

Briault had called for an intensification of stress testing of credit risk earlier this year and admitted that he should have included liquidity risk stress testing in this call. He described five areas where he expected organisations to improve their handling of credit and liquidity risk – firms should improve their capitalisation against liquidity risk – stress testing must be improved and must reflect current and prospective credit and liquidity risk conditions – board and senior management should review all strategies – and create contingency plans – and finally, that boards needed to ensure that their senior management was competent to operate in this new high-risk era; experience of benign lending markets alone was not sufficient.

Briault concluded by saying “We want there to be a competitive and thriving mortgage market in the UK which clearly meets the needs of consumers. This requires lenders who have clear strategies - appropriately stress tested - that take account of the changing world, with viable funding models, and with boards and senior management that understand and know how to operate in the best interests of their customers in a variety of market conditions.”