Speaking at the Building Societies Association Conference 2015 in Harrogate Bailey also sent out a message to board executives that a culture of risk awareness and ethical behaviour should come from the top.
Bailey said: “The main area of growth has been buy-to-let lending, that’s not just in societies but for lenders in general.
“I’m always worried that people demonise it. I think it’s something that we should watch very carefully. We don’t see evidence today that buy-to-let is of a poorer quality than equivalent owner occupier lending.
“We see a fair amount of stability, but of course it’s something we encourage you to watch very carefully by stress testing across all loan books.”
Bailey said societies need to enter into a culture of responsibility by creating a world with an emphasis on risk management rather than having to rely on enforcement and large fines from regulators.
Yesterday it emerged that five of the world's largest banks, JPMorgan, Barclays, Citigroup and RBS, were fined £3.6bn for financial crimes which included manipulating the foreign exchange markets.
Bailey added: “We think that there should be a tone from the top in terms of a culture of risk awareness and ethical behaviour.
“We do see it as a responsibility of boards to establish strategy, set the risk appetite, monitor risks across the business and hold management to account.”
