Building societies chief warns against ‘monoculture’ in banking world

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THE new head of the Building Societies Association has warned politicians and regulators against creating a “monoculture” in the financial services industry that will make it less resilient to crises.

Speaking at the annual conference in Manchester, chief executive Robin Fieth said he wanted to see a well-capitalised sector with diverse business models, strong competition and continual innovation that focuses on serving consumers and is embedded in communities.

But he claimed that the actions of policymakers and regulators are “driving us inexorably down the path of sameness”.

Mr Fieth told the audience: “If the financial crisis taught us nothing else, we must learn the lesson that concentration risk is dangerous and that from diversity comes strength.”

He said he feared an environment in which different business models, non-vanilla lending, product innovation are seen as non-conforming and treated with suspicion.

Mr Fieth warned against an ever-increasing tendency towards a single corporate structure, “a monoculture” driven by the need to be able to raise capital rapidly and the anti-competitive constraints on non-corporate entities from being able to do so.

The BSA is working with regulators to make it easier for member-owned mutuals to raise money. Unlike banks, they cannot sell shares in the traditional sense.

Mr Fieth added: “I fear a legislative and regulatory regime that makes it ever more difficult for smaller businesses to flourish. In which the barriers to new entrants become ever greater.

“I fear a situation where it becomes increasingly difficult to, if not impossible, to deliver a great customer experience and outcome, so tied up in regulation are we that we cannot deviate from the script.”

Politicians introduced tough new rules on the amount of capital that lenders must hold in the wake of the financial crisis of 2008.

David Cutter, chairman of the BSA and chief executive of the Skipton Building Society Group, told The Yorkshire Post: ”2013 should serve as a reminder of the importance of diversity.

“Building societies accounted for more than 100 per cent of growth in UK net residential mortgage lending last year.

“Just imagine what might have happened if the mortgage market had shrunk in 2013 despite the Government initiatives and the impact that would have had on consumer confidence.

“Diversification is healthy and should be encouraged. The results of the building societies over the last 12 months have shown that you can run a sustainable model.”

Mr Fieth replaced veteran BSA chief Adrian Coles in December and inherits a sector in fine form.

Britain’s building societies have around 20 per cent of the cash savings and residential mortgage markets and although the number of societies may have falled in recent years to 45, the sector’s market share is steady and even rising in some markets, said Mr Fieth.

The annual conference heard from a senior executive at Hewlett-Packard about the need for building societies to embrace the digital age.

Jeremy Suddards, a vice president in the technology giant’s financial services division, said more than 12m banking apps have been downloaded in the UK.

Last year, consumers carried out 18.6m banking transactions on their mobile devices every week, more than double the amount in 2012.

He is predicting a rise in the use of biometrics to combat the growing challenge of security in online banking.

Sophy Ridge, the Sky News political correspondent, provided an analysis of the political environment for delegates.

She said wealthy landowners in the South East and disenfranchised Labour voters in the North are united by their dislike of the Westminster elite and “the suspicion that all the important decisions affecting them are being made within London in SW1”.