The government has published a discussion document setting out its vision for the building societies sector, Mark Hoban, Financial Secretary to the Treasury, announced today. The consultation sets out how the recommendations of the Independent Commission on Banking (ICB) will apply to the building societies sector.
Today’s document, which has been welcomed by the sector, confirms the government’s support for the distinctive alternative offered by building societies. It outlines the government’s intention to remove unnecessary barriers to growth and help to create a more level playing field with banks. It also confirms that:
- building societies legislation will be aligned with ring-fencing requirements to ensure clarity and a level playing field
- the loss-absorbency proposals will apply to building societies in the same way as to banks of a similar profile, and creditor hierarchies for building societies and banks will be equalised
- the government will consider further changes to building societies’ legislation, including relaxing sectoral lending and funding requirements if they are found to unnecessarily constrain institutions in their ability to serve their customers
Mark Hoban said:
The government has committed to increasing choice and diversity in financial services. We believe that building societies can play a vital role in this. The proposals we are setting out today provide a real opportunity for societies to expand their services and attract a new generation of consumers.
Adrian Coles, Director-General of the Building Societies Association, said:
I welcome the government’s renewed focus on providing the right legislative framework to support a thriving building society sector in the UK. Our sector is diverse and provides services to around 25 million customers, through a model that is very different both in structure and ethos to the plc banks.
I would echo the high level principles set out in the paper for building societies to be able to compete fairly, free from inappropriate burdens and maintain our distinctive approach and lower risk business model. Our next step is to study the paper in detail, engage our members and then work pro-actively with the Treasury to deliver the right end result.
Graham Beale, Chief Executive of Nationwide Building Society, said:
I warmly welcome the government’s recognition that building societies provide an important and distinctive alternative for consumers. As the largest building society, Nationwide is unique on the high street, providing a mass-market, mutual challenge to the banks across the full range of retail financial services.
We want to continue this vital role, expanding carefully over time into new areas such as SME banking. The government’s commitment to review and revise building society legislation to support these aims - whilst maintaining the low risk approach that has served our members well throughout the crisis - is a positive step forward.
Notes for Editors
Further information on the government’s support for building societies, including today’s consultation paper, can be found in our consultation section under: The future of Building Societies.
Today’s consultation is open for comments until 6 September 2012.
It follows the publication in June 2012 of the Government’s White Paper, which details how the Government will implement the recommendations of the Independent Commission on Banking (ICB). The White Paper can be found in the ICB section of this website.
On 16 June 2010, the Chancellor of the Exchequer and the Secretary of State for Business announced the creation of the ICB, to be chaired by Sir John Vickers. The Commission was asked to consider structural and related non-structural reforms to the UK banking sector to promote financial stability and competition, and to make recommendations to the Government by the end of September 2011.
The ICB published its report on 12 September 2011, which can be found on the ICB website, and the Government published its response - which was open for consultation until March 2012 - in December 2011.