Financial Conduct Authority chief executive designate Martin Wheatley has warned building societies not to assume they are immune from the problems faced by the rest of the financial services sector.
Speaking at the Building Societies Association’s annual conference in Manchester last week, Wheatley said: “Many of you say being a mutual allows you to focus on your members’ needs rather than shareholders. This may be true but I would like to sound a note of caution. The message is, for governing boards in particular, do not rest on your laurels. Do not assume being a mutual assures you the luxury of knowing the business is getting the best for its customers.”
Wheatley cited the example of Norwich & Peterborough, which was fined £1.4m in April 2011 for misselling Keydata products to 3,200 customers. N&P also had to pay out around £51m in redress.
He said: “Many of you do not even offer your own investment advice but this shows what can happen when societies, in particular management and boards, take their eye off the ball.”
Wheatley said in a low interest rate environment, societies need to understand the risks of moving into niche areas.
He said: “I know many of you have seen how others got their fingers burnt by diversifying in the boom years and have learned from those mistakes but as a regulator I need to be alive to potential issues. I need to make sure that I am prepared for what may happen and I want you and your boards to do the same.”
Essential IFA managing director Peter Herd says: “I applaud the regulator for saying this but it should have been said years ago. Society members should not be encouraged to take out their money from a savings account and move it into a riskier product.”