BSA 2011: Mutuals have an opportunity to be seized

Robyn Hall

May 4, 2011

Speaking at the BSA 2011 Annual Conference in Birmingham today he also urged the Coalition Government to push forward with its commitment to foster diversity and promote mutuals.

He said: “In the light of the position of our competitors, the resilience we are clearly demonstrating to the outside world and our fundamental business ethic, mutuals have a tremendous opportunity to emerge as even more successful businesses in the future.”

Reflecting on the Coalition’s commitment last May to “foster diversity and promote mutuals” the BSA chairman noted that political support for mutuals is slowly translating into policy, but more could be done.

“We would like to see further tangible steps taken to bring to life this stated political support for mutuals,” he said. “The first is for the Government to facilitate the return of Northern Rock to the mutual sector. What more powerful signal of commitment to its policy of corporate diversity in financial services could there be than that? The second would be to help us resolve the issues that remain in the development of a replacement capital instrument for mutual lenders.”

He also urged the authorities to do their utmost to ensure that costs of the new regulatory regime are controlled and that rules are applied proportionately to smaller businesses. But he also concluded that the sector could help itself in terms of regulatory intervention and went on to say: “It is up to building societies and mutual deposit-takers to convince the regulator that their activity in this area should be directed towards their competitors in the market rather than to us.”

Reflecting on business conditions for mutuals, he said: “The mortgage market is a long, long way from returning to any form of normality, although I must say I am encouraged to read of the number of building societies keen to improve their mortgage lending performance during 2011.”

On the savings side, the BSA chairman raised one recent development that has been distinctly unwelcome – the decision of the Coalition Government to reverse the previous Government’s policy of giving National Savings & Investments a zero funding target.

He said: “We were disappointed to see that in the budget the Treasury announced that National Savings – backed by the tax-payer and able to design its own tax-free products – would be seeking to take £2bn net from the savings market during the current financial year. This is money that banks and building societies could otherwise have been lending to first time buyers and other borrowers.”

He concluded his speech by further emphasising the opportunity for mutuals, and added: “The disgrace within which our competitors are now held, many of whom owe their very existence to taxpayer subsidy because they were unable to stand on their own two feet, gives mutuals the opportunity of a lifetime to gain people’s trust and to prove that they are relevant, indeed essential, to the age in which we live. Many external commentators agree with that view. Our job now is to ensure that increasing numbers are persuaded to that view. I believe that we are pushing at an open door.”

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