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BSA attacks “irrational pessimism” of regulators

The Building Societies Association has attacked the “irrational pessimism” of regulators addressing the problems that contributed to the financial crisis.

Speaking at the BSA annual lunch yesterday, BSA chairman David Webster said the current regulatory change risks forcing mutuals into a regulatory “straitjacket”.

He said: “There were certainly example of irrational exuberance on the part of institutions in the run up to 2007, but there are also currently examples of irrational pessimism on the part of regulators as they seek to address the problems of recent years.

“It is crucially important regulators see mutual institutions as at least equal to the equivalent plc structures and acknowledge the differences, when appropriate, rather than force mutuals into a plc straitjacket.”

Webster said the vast programme of regulatory change, from the building society sourcebook to capital requirements and the break up of the FSA, could potentially increase costs at a time when building societies are becoming more efficient.

He said: “We face a complete overhaul of the regulatory system, all of which could potentially increase our costs at a time that we are succeeding in becoming more efficient by lowering costs.”

Treasury financial secretary Mark Hoban was unable to attend the event as planned due to parliamentary business, but Treasury director of financial services Alison Cottrell delivered his speech. Cottrell said building societies have to face up to the new regulatory environment.

She said: “The combined remit of the FSA meant that participants in financial services and the market and particularly the ordinary consumers of retail products did not always get the appropriate regulatory focus. The Government is committed to changing this.

“Adapting to the new world is a challenge, with greater competition for retail deposits, more intense supervision and tougher capital requirements. Building societies, like others, have to face up to those realities and evolve.”

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