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BSA warns over increased regulatory costs

The Building Societies Association has called on regulators to minimise the impact of increased regulatory costs on mutuals under the new regulatory structure.

Speaking at the BSA’s annual conference in Birmingham today, BSA chairman David Webster said the Government’s February consultation paper, A new approach to regulation, makes clear regulatory costs for smaller mutuals will rise and that regulators need to ensure this is kept in check.

He said: “The new regulatory authorities must do their utmost to address this by ensuring that costs are appropriately controlled, that rules are applied proportionately to smaller businesses, that the diversity of business models is respected and that there is appropriate dovetailing on domestic, European and international regulation.”

The new regulatory structure will see the FSA replaced by the Financial Policy Committee and the Prudential Regulation Authority within the Bank of England and the Financial Conduct Authority set up as an independent market regulator.

The Bank of England governor will be at the head of the FPC, the PRA, the Monetary Policy Committee and the Special Resolution Regime which winds down banks.

Webster said: “This concentration of power makes it essential the new arrangements work effectively, efficiently and with appropriate democratic accountability.”

The FPC will aim to maintain financial stability by using macroeconomic tools like loan to value ratios or borrowing targets and Webster says there will be tension between the aims of regulators and the needs of borrowers.

He said: “It will not be easy to marry together the natural demand on the part of politicians and, similarly, good quality potential borrowers to have reasonably priced loans enabling the housing market to thrive again, while at the same time meeting the concerns of the regulators determined to prevent another credit boom.”

He also called on the Government to remutualise Northern Rock and to help the industry develop appropriate capital instruments to meet the requirements of Basel to “bring to life” the Government’s commitment to foster diversity and promote mutuals.

He added that banks are now seen as a “disgrace” by the public and that building societies need to exploit this.

He said: “Frankly, if we cannot seize this moment and demonstrate a distinctive, robust, consumer-focused alternative to the banks, then we may well look back with regret.”

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