View more on these topics

FSA lambasts building societies

The FSA has heavily criticised the building society sector for its failings in the run up to and during the credit crunch.

Speaking at this year’s Building Societies Association Conference in Yorkshire, Hugh May, reading on behalf of the FSA manager of retail firms division Nick Lock, attacked building societies for their lack of awareness and inadequate risk policies over the last few years.

May said: “The fact remains that a number societies did not act sensibly to the onset of the crisis and some saw it as a business growth opportunity. We see that as a fundamental error, as was carrying on or even starting commercial and high risk lending even in 2008. This is partly why there are less building societies being represented at this conference than there was a year ago.”

The regulator also hit out at mutuals’ lending practices. May said: “We have seen unsustainable margins on prime lending, over-ambitious growth targets, a risk appetite too high or not adequately imposed by the boards. Riskier lending was fundamentally mis-priced and inadequate investment in risk management.”

May also attacked some building societies for their wholesale loan acquisitions: “There was also a failure to understand risk infection arising from acquired portfolios, a failure to evaluate the downside risks as well as the upside potential, as well as over-payment for subsidiary business lines.

“Societies have purchased what have turned out to be unmarketable securities and generally a slow reaction to market changes.

“Many warnings were included in messages that the FSA has given over and over again to societies – I refer you to speeches given in forerunners to this conference by John Tiner and Hector Sants. Clearly not everyone was taking note.”

BSA chairman John Goodfellow agreed that some building societies were in a weakened position and did not rule out further a repeat of the Dunfermline crash.

He said: “The time for only nice words by the authorities about mutuals is over. We need to see action, support and a desire to build a better future gaining traction in the minds of the Tripartite.

“Equally it is time to remove any lingering sense of complacency in building society boardrooms.”


Trojan warrior

I always find it interesting to meet promising fund management houses not yet on the radar of the average investor or even some brokers. A good recent example is Troy Asset Management, which has quietly been building a good reputation with its fund range and in particular the equity income fund.

Save us from pension folly

Over the last few years, I have become increasingly confused when people in our industry refer to the “opportunity” from personal accounts.


News and expert analysis straight to your inbox

Sign up


There are 10 comments at the moment, we would love to hear your opinion too.

  1. FSA
    It is a bit ‘Rich’ and way far too late for the FSA to comment now. A lamented deceased friend (ex.fraud squad) pointed out the speculating/error of the ways of the Building Societies more than 35 years ago!

  2. Julian Stevens 20th May 2009 at 12:18 pm

    FSA lambasts building societies
    But nothing, as usual, about the banks, who are unarguably the principal culprits behind the dire state of the UK economy. It’s almost as if the Banks are of-limits to any hint of criticism from the FSA, still less any meaningful action. All we hear instead is vacuous rhetoric about how “very frightened” we should all be from now on. As IFA’s we are already, after 10 years of being terrorised with a never ending succession of hindsight reviews, very frightened of the FSA. The Banks, by comparison, are just carrying on as usual with huge salary and bonus and pension packages for all their top people, as reported in this week’s Ch. 4 Dispatches.

  3. fsa re building societies
    “Shutting the stable door after the horse has bolted ” springs to mind. I thought the FSA were meant to prevent these situations not to comment after. We can all make judgements after an event but bearing in mind the enourmous budget that the FSA has & its role to avoid these situations happening it seems to be doing a rather poor job.

  4. FSA/Building Societies
    Completely agree with the last post.

  5. FSA Bankers
    The FSA is run by bankers who don’t know how to regulate anything. What they are good at is scaremongering after the event and stealing IFAs money whilst also decimating the confidence in the general public when it comes to saving. Hence no one saves nows so well done FSA!

    When are they all going to get the sack? That’s the question I want answered, it’s an inevitability just like the speaker in the house of commons. Roll on elections.

  6. FSA Hypocricy
    How dare they (FSA) criticise anyone. These are the people who failed to stop Equitable Life, Independent Insurance B and B, Northern Rock and virtually the whole banking sector from going bust and yet they are all over us like an ill fitting raincoat. The FSA should be disbanded and a new system introduced which includes everyone, yes even intermediaries.

  7. FSA lambasts building societies
    This is a clear case of the Pot calling the kettle black. The FSA did not appreciate what was going on, failed to act and treated the whole problem as business as usual. Now with hindsight they try to blacken the building societies with their own (FSA’s ) failings. Let us hope that the new broom sweeping Parliament will sweep the FSA away to obscurity, where they belong.

  8. Hector Sants
    Big Hector needs to get this mess sorted out. It’s time for a heavy-handed approach and he’s the man for the job.

  9. FSA
    Typical the FSA are only looking after themselves and the banks, whilst trying to kill of IFA’s / Mortgage brokers. They seem not to be answerable to anybody. Let hope a new goverenment, less thieving MP,s and a change to FSA personel. (I feel a recovery coming on).

  10. Mealy-mouthed hypocrites
    Is the point of a regulator to:
    a) be wise before the event, or, b) give everyone a good kicking after the event, whilst conveniently ignoring their own failings? They act like a school bully, picking on the weak (IFAs and building societies) and looking out for their friends (insurance companies and banks). It’s long past time for a general election so that we can sweep out all that has been created by this crooked Labour Government and establish a fairer and more effective regulatory system.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm