This was the message from Graham Beale, BSA chairman and chief executive of Nationwide Building Society, who reiterated that societies continue 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.
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.”
