BSA welcomes Treasury discussion on societies
“The BSA is part of the expert group that has been working with Treasury exploring some of the issues surrounding access to capital which is one of the primary challenges that building societies and the mutual sector face in the medium term.
“The BSA welcomes the publication of this discussion paper which is well researched and clearly identifies the current issues around core capital requirements for building societies, specifically the need for a new Tier 1 capital instrument that is compatible with the mutual model. The Treasury has also summarised, with great clarity, the need within the mutual sector for a ‘mutual’ compatible form of capital instrument that qualifies and meets the set of requirements coming out of Europe.
“The Treasury raises some interesting considerations on whether a new form of capital instrument could lead to institutional shareholders becoming entitled to a specific governance role at individual societies (while ensuring that mutual values remain paramount), and how this would change the current mutual business model. We will be exploring these issues of principle when responding to the paper.
“We will be putting forward a considered response on the development of a new core tier 1 capital instrument. This can only remain ‘work in progress’ until European legislation is finalised and we can have more certainty that it will not only meet the needs of the mutual model, but will be compliant with European requirements.”