The Council of Mortgage Lenders and the Intermediary Mortgages Lenders Association warned the Financial Services Authority against imposing similar capital requirements on non-deposit taking lenders as it did on banks and building societies. The groups said imposing overly onerous rules on the sector could force them to leave the market, seriously damaging competition. The warning comes as the CML said more than half of all mortgages taken out during the past four years would have been barred if affordability tests being proposed by the FSA had been in place. Non-deposit taking lenders tend to be specialist lenders, often operating in the buy-to-let or non-standard and sub-prime market. The sector has been hit hard by the credit crunch, as it is reliant on using the wholesale money markets to raise funds to lend, and a number of groups stopped writing new business, although some have recently re-entered the market. Under current rules non-deposit taking lenders have to hold lower levels of capital than banks, to reflect the fact that they do not hold people's savings. But the FSA is proposing that the capital they hold should be increased to a similar level as that held by banks. However, the trade bodies argue that the FSA's analysis does not accurately reflect the reality of the market, pointing out that it was wrong to equate high-risk lending with irresponsible lending. They particularly take issue with the suggestion that specialist lenders encouraged mainstream banks to undertake high-risk lending, saying non-banks were never at the forefront of some products, such as advancing more than 100 per cent of a property's value. Peter Williams, IMLA executive director, said: "We see little evidence to support the argument that non-banks encouraged deposit-takers to under-price risk or take on more risk."