Give us proper respect and appreciation, urge mutuals

The BSA yesterday used its annual lunch in London to call for more recognition of building societies' distinctive qualities as regulators work out how to strengthen the financial system.

BSA chairman David Webster also called for fair competition, so Government-backed banks, such as Royal Bank of Scotland and Lloyds, do not undercut mutuals and price them out of the mar-ket.

"Let's build in to the new processes a proper respect for, and appreciation of, mutuals," he said.

"It is crucially important for the regulators... to see mutual forms of institutions as at least equal to the equivalent plc structures, and to acknowledge the differences when appropriate, rather than force mutuals into a plc straitjacket that risks compromising (their) advantages."

Regulators are currently drawing up reforms for the sector to avoid a repeat of the financial crisis. Mutuals, owned by their members rather than shareholders, fear changes may hit them indiscriminately and disproportionately.

"Yes there were certainly examples of irrational exuberance on the part of institutions in the run-up to 2007," said Mr Webster. "But there are also currently examples of irrational pessimism on the part of regulators."

Mr Webster also called for a "level playing field" in the mortgage and savings markets.

"We need to ensure that those institutions that failed in 2007/08 do not emerge from that failure strengthened, and almost immune to competition, as a result of the tax-payer support that enabled them to ride out the crisis."

Mr Webster also called for a new capital instrument that does not dilute mutuals, but allows them to boost capital ratios to ensure they are better able to weather crises. Guests at the lunch in London also heard from Alison Cottrell, a director of financial services at the Treasury. She replaced Mark Hoban, financial secretary to the Treasury, who was called away on "parliamentary business".

"Mutuals have a long and proud history and the Government wants to see mutuals succeed and to do so sustainably with the confidence and trust of members and customers," she said.

Yorkshire Building Society corporate development director Andy Caton welcomed "positive language" coming from Government.

He said: "Building societies do not just add to the level of competition in the market place – I think they bring a better form of competition to banks because fundamentally they are about sustainability and security."

Leeds Building Society chief executive Ian Ward said: "We all appreciate the need for regulation that works and that's got to be proportionate."