Philip Ryley, head of financial services and markets at Michelmores, said increasing numbers of firms were facing ‘distress situations’ in the current market, particularly those lending or distributing mortgages in the non-conforming sector.
He explained that due to the financial markets crisis, it was inevitable some firms would face trading difficulties, but it was difficult to predict how far the problems would spread. Ryley said businesses must face up to this fact and be prepared.
He said: “While it is very important for the markets not to overreact, simply putting on a brave face when your business is facing serious financial difficulties is not going to be sufficient to address the key issues. Firms must be prepared and make provision for this financial virus spreading.
“Equally, directors need to be very careful in how they respond to these turbulent times. There are strict regulatory requirements on firms and their senior management being open and co-operative with the regulator, especially regarding the timing of notifications to the Financial Services Authority (FSA).
"We anticipate that the FSA will be receiving an increasing number of requests from firms for urgent meetings to discuss distress situations.”
Bill Warren, director of associate members at the Regulatory Alliance of Mortgage Packagers, commented there was an element of denial in the industry over the current problems facing it.
He added: “There is also an element of not really understanding what the phrase ‘corporate recovery’ means. If firms are not proactive right now, they will get caught and things will have washed over them before they realise they have been caught. It’s down to simple things like proactive management of cash flow.
"Brokers need companies like Michelmores now, unless they are super-confident that nothing negative will come their way in the next 12 months. This applies whatever size of business you are.”
