Ecology chief hits out over the banking bailout cost to mutuals

Paul Ellis, chief executive of Ecology, said the State had “no control” over the taxpayer-backed lenders and warned that plans for a green investment bank are being “watered down by the day”.

Mr Ellis also told the Yorkshire Post that Ecology, which marks its 30th anniversary this year and was the last building society to be set up in Britain, was deliberately a “slow money” organisation in contrast to the excesses of the major banks.

“We are effectively subsidising the banks (through the Financial Services Compensation Scheme). Despite the fact they have benefited from enormous support they are not lending enough... There is no shareholder control.”

The criticisms by Mr Ellis, who was an investor with Ecology before he took over the top job in 1995, echo the complaints made by the heads of Yorkshire, Leeds and Skipton building societies over the “disproportionate” costs of the FSCS levy.

He also warned that consolidation in the financial services sector – Lloyds Banking Group took over HBOS at the height of the crisis in autumn 2008 – was creating “enormous systemic risk”.

He added: “The danger with the mortgage market is that you end up with the whole market in the hands of five or six lenders, reducing choice and (leading to) higher prices.”

Mr Ellis criticised as “astounding” the £2m bonus set to be awarded to Eric Daniels, the chief executive of taxpayer-funded Lloyds, before he retires next month and said the £800m tax raid on banks, announced by George Osborne last week, was a “political sop”.

“The problem is that it is a short-term measure that raises a small amount of money... but avoids root and branch reform.”

Ecology, which is based in Silsden in West Yorkshire, reached £10m net lending for the first time last year. It has seen demand spike in the aftermath of the crash as consumers look for stable lenders and ethical investments.