Salz Review - Wall Street Journal

67
Salz Review
An Independent Review of Barclays’ Business Practices
“if the borrower can show that they have a credible repayment strategy.” 116 These
mortgages offer lower regular payments by customers who are required to repay the
capital in its entirety at maturity. Flat or declining house prices in recent years,
coupled with low-returns on savings, reduce a customer’s room for manoeuvre and
leave banks with less cover in cases of default. On the other hand, many of these
mortgages will have been taken out at a time of rising property prices, when it would
have seemed a reasonable assumption to borrowers that they would be able to
remortgage on maturity, and when joining the property ladder was preferable to
paying rents for many years with no prospect of building equity. Banks (and
regulators) should avoid this being a new opportunity for claims management
companies. Instead, Barclays and its peers should consider how most helpfully to
respond to the issues now faced by their customers whose mortgages are coming to
maturity. This is an opportunity for Barclays to show that its actions are consistent
with its purpose – “Helping people achieve their ambitions, in the right way.” 117
6.68 Banks also face a number of legacy issues in the global wholesale markets. In the US,
for instance, the Federal Energy Regulatory Commission (FERC) 118 is looking into
alleged manipulation of the US energy markets. This illustrates an issue about the
development of regulation. Over time, regulation applies broadly agreed standards to
new markets or asset classes. Until that point, there is a possibility that those trading
in such markets or asset classes will have an opportunity to take advantage of the
relative lack of such regulation. Banks should take care to consider the application of
the spirit of regulation to these trading opportunities ahead of the precise regulation,
having due regard to public expectations and to the reputational implications.
Industry observation C: Legacy
As banks take actions to restore trust, there is a risk that their task will be made
more difficult by the emergence of historical issues that crystallise and become
public in the future. This is, to some extent, inevitable. The regulators may have
an opportunity to recognise the historic nature of these issues and so help the
rehabilitation process.
116 FSA, “FSA confirms new rules that will hard-wire common sense into the mortgage market”
(FSA/PN/098/2012), 25 October 2012.
117 Barclays’ website: http://group.barclays.com/transform/values.
118 Bloomberg website, 29 January 2013; see www.bloomberg.com.