BSA: Does the regulatory revolution represent overkill?

BSA: Does the regulatory revolution represent overkill?

BSA: Does the regulatory revolution represent overkill?

Speaking at the Building Societies Association (BSA) Annual Lunch today, David Webster, Chairman of the BSA, raised concern about the vast programme of regulatory reform that will affect almost every area of building society operations and questioned whether a point of regulatory overkill has been reached.

He acknowledged the impact of the external market conditions: “The financial services market has faced huge changes over the last few years, not least those markets in which BSA members operate. Net advances in the residential mortgage market have fallen from an annual figure of around £110 billion in the four or five years running up to 2008 to perhaps £10 billion this year. Few UK industries will have experienced such a precipitous decline in activity.”

Highlighting some of the efficiencies that mutuals have introduced, he continued: “We’re open for business, we’re getting more efficient, and we’re maintaining very high service and lending standards.”

He also touched upon the positive benefits of diversity and choice that mutuals bring to the UK financial services landscape before turning to the topical issue of regulatory reform, saying:

“I cannot ignore the vast programme of regulatory change occurring at the moment that affects, or will affect almost every area of our business . we’re having the Mortgage Market Review, and we’re going to have the EU’s Responsible Lending policy. More onerous and expensive liquidity arrangements are already with us and we’re having capital requirements increased, and more tightly defined… And we face a complete overhaul of the regulatory systems as the FSA disappears and is replaced by a new system with the Bank of England at its heart.”

“Given the huge changes in the markets we have already seen, does the regulatory revolution represent overkill?… Yes, there were certainly examples of irrational exuberance on the part of institutions in the run-up to 2007, but there are also currently examples of irrational pessimism on the part of regulators as they seek to address the problems of recent years in what might be far too restrictive a manner, given the need to create the conditions for continued economic recovery”.

David Webster concluded his address with a plea to Government to “build into the new processes a proper respect for, and appreciation of mutuals. . We need a proper appreciation of the mutual need for a capital instrument that would enable them to boost their capital ratios as necessary and we need to ensure that the new regulatory structure does not disadvantage mutuals through high costs or restrictions not placed on others.”

~ Ends ~

Notes to Editors

1. A copy of David Webster’s BSA Annual Lunch speech can be viewed here

2. The Building Societies Association (BSA) represents mutual lenders and deposit takers in the UK including all 49 UK building societies. Mutual lenders and deposit takers have total assets of over £365 billion and, together with their subsidiaries, hold residential mortgages of almost £235 billion, 19% of the total outstanding in the UK. They hold more than £245 billion of retail deposits, accounting for 21% 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. Photographs of David Webster are available from the BSA press office, or from the Association’s website at www.bsa.org.uk or Headlinemoney www.headlinemoney.co.uk.

Contact – Rachel Le Brocq – Tel: 020 7520 5905