1. Successful places with homes and jobs A NATIONAL AGENCY WORKING LOCALLY Sector risk and future regulatory requirements Matthew Bailes Director of Regulation, HCA

2. What are we worried about?  Loss of social housing assets  Most egregious failure = insolvency…and lenders enforcing security  But managed loss of “public value” owing to poor management / commercial losses also a problem

3. Why?  Insolvency / re- possession would be a game changer  Tenants would lose protections  Taxpayer might lose grant  Credit risk would increase  Image of sector would be changed

4. What’s changing  Gone: 30 year money from banks  Gone: 50% plus grant rates  Going: Welfare underwriting rents in full  The future: complex choices for Boards  Opportunities and risks  A more cyclical model?

5. Don’t be fooled by short-term conditions

6. Key risks – sector risk profile  Interest rates / re-financing  Sales  Income / welfare  Cash flow  Complex finance / covenants  Commercial exposures  FRS102  Weak governance

7. What are we doing?  Framework changes from April 2015  Staff / structure changes…with more capacity to come  Different operating model – deeper dive, less often  Swift, decisive, transparent action on non-compliance

8. What should you be doing?  Stress-testing…  And establishing appropriate controls  Challenging yourself on skills  Focussing on risk flows  Basic questions: – What’s the most we can lose? –How do we know?

9. Final thought Don’t despair!  We are not against risk, we are against undue risk and weak controls  A well-run social housing provider should not get into serious difficulties