PS15/10: MIPRU Chapter 4 simplification: Feedback on CP14/28 and final rules

In this Policy Statement we summarise the feedback we received to the proposals contained in CP14/28 and give our responses. We also set out the final rules, which will come into effect on 26 April 2015.

Why are we issuing this Policy Statement?

On 8 December 2014 we published a Consultation Paper (CP14/28) proposing changes to our Handbook of rules and guidance to simplify the provisions for calculating capital requirements for non-bank mortgage lenders (NBLs).  These provisions are in the Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries (MIPRU), specifically chapter 4 of that sourcebook (MIPRU 4).

The provisions currently in MIPRU 4 cross-refer to the Prudential sourcebook for Banks, Building Societies and Investment Firms (BIPRU), which contains complex rules derived from European legislation, designed primarily for banks and building societies. NBLs have a different business model to most deposit-takers so many of the provisions in BIPRU are redundant for them or overly detailed.

The Financial Services Authority (FSA) committed in the Policy Statement (PS12/16) on the Mortgage Market Review (MMR), published in October 2012, to explore how the relevant provisions in BIPRU might be both simplified and incorporated in a standalone version of MIPRU 4.

Policy Statement PS15/10 [PDF]

Who is this Policy Statement aimed at?

The rules set out in this Policy Statement apply to NBLs that undertake home financing and/or home finance administration (with assets on the balance sheet) that is connected to regulated mortgage contracts.  The PS is relevant both to NBLs subject to the current version of MIPRU 4 that cross-refers to BIPRU, implemented on 26 April 2014, and those that were granted a modification of MIPRU 4 by consent that allowed them to continue to apply the version of MIRPU 4 as it stood before that date.

What do NBLs need to do next?

All NBLs, both those subject to the current version of MIPRU 4 and those that used the modification, should review the changes to the Handbook set out in Appendix 1 to establish how the revised rules will affect their business and any changes that may need to be made to comply with them.

What will we do?

The Handbook changes set out in Appendix 1 will come into force on 26 April 2015.  The comments from respondents on the two further issues raised in the discussion chapter of our CP will be considered in any future policy review of MIPRU 4 (but they are not part of this current simplification exercise).

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