BSA: Mutuals well placed to prosper, but capital reform must be addressed
Against a backdrop of financial instability, uncertainty and recession, building societies and the wider mutual sector have generally coped well with the pressures, continuing to offer good value and quality service to their members. However, there is no room for complacency; challenges remain and a solution to mutuals’ capital requirements must be found. This was the message from Graham Beale, BSA Chairman and Chief Executive of Nationwide Building Society, to the BSA Annual Conference today.
On the strength of the sector he said:
“In the context of an unprecedented market environment, squeezed margins, unfair competition from heavily subsidised competitors, severe dislocation of funding markets (including intense competition for retail savings) and a rapidly declining mortgage market, mutuals have maintained extremely high levels of service, have resolved problem cases without material recourse to the taxpayer, have benefited less from Government funding schemes than their competitors and as a sector have remained resilient, contributing to the diversity of financial services and continuing to provide a competitive and real alternative to the banks.”
Reflecting on capital and the need for an instrument that does not compromise the mutual model, Mr Beale said:
“European and UK regulators have developed a definition of capital which encompasses four key characteristics – fully loss absorbent in a going concern situation, permanent, subordinated and have an un-capped distribution mechanism. It is this final point, the desire to have variable distributions i.e. to pay dividends which cuts right across the mutual model and compromises the interests of our members. It contradicts the fundamental premise that a mutual exists for its members, not for shareholders. We will continue to work to find a solution.”
Mr Beale sent a message to the political parties, urging them to deliver on their election pledges with concrete actions and to support the mutual model by amending the Financial Services Compensation Scheme and modernising the Building Societies Act.
He concluded:
“There is much to be proud of in the building society sector: our unique ownership structure makes us inherently prudent and solely focused on the needs of our customers. We offer great value and outstanding service. We have survived the financial crisis thus far, but we must learn from the crisis and evolve our societies to adapt to the changing world and the more onerous regulatory environment.”
Ends
Notes to Editors
1. A full copy of Graham Beale’s speech can be viewed on the BSA website here
2. The Building Societies Association (BSA) represents mutual lenders and deposit takers in the UK including all 51 UK building societies. Mutual lenders and deposit takers have total assets of almost £375 billion and, together with their subsidiaries, hold residential mortgages of almost £240 billion, 19% of the total outstanding in the UK. They hold over £245 billion of retail deposits, accounting for just under 22% of all such deposits in the UK. Mutual deposit takers account for about 36% of cash ISA balances. They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.
3. The BSA’s Annual Conference is being held in Manchester on 5 and 6 May 2010.
4. Photographs of Graham Beale are available from the BSA press office, or from the Association’s website at bsa or Headlinemoney
Rachel Le Brocq
Press and Public Affairs Manager
Tel: 020 7520 5905
Mobile: 07773489644
Fax: 020 7240 5290
www.bsa.org.uk
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