Treasury financial secretary Mark Hoban has rejected a call from FSA chairman Lord Turner to reverse the liberalisation of the mutual market.
Turner told the Treasury select committee in November last year that allowing parts of the mutual sector to move into areas beyond their core business of prime real estate lending was the regulator’s “biggest mistake”. He said reversing the liberalisation of the sector which occurred during the 1980s and 1990s is an “unfinished part of our regulatory agenda”.
But speaking at an All Party Parliamentary Group for Building Societies and Financial Mutuals in the House of Commons this morning, Hoban said this was a matter for the Government, not the regulator and that the idea was not under “active consideration”.
He said: “We can look at a number of building societies where that extension of activities has been managed exceptionally well, others where it has been less effective, but that is not a problem that was exclusive to building societies as the financial crisis demonstrated.”
The 104 MPs who are calling for the remutualisation of Northern Rock to be given “equal and due consideration” to other options, will welcome Hoban positioning himself as “neutral” on what to do with the Rock and his comment that the Treasury has no “principle objection” against remutualisation.
However, Hoban added that he did not know how long it will be before UK Financial Investments comes forward with proposals for what to do with Government stakes in Northern Rock and other banks. He said UKFI must give due concern to the return on the taxpayer’s £1.4bn investment in the failed bank and ensure there are no competition concerns resulting from the divestment.
The APPG chair and Conservative MP for Cardiff North Jonathan Evans said the FSA’s appointment of Martin Stewart as head of building societies was a positive move but that a lack of a similar post for mutual insurers meant they were suffering from “benign neglect”.
He said: “We would like to see more Government support for the initiative of the FSA appointing a head of mutual policy because many of those engaged in regulation at the FSA are very much more experienced in the plc sector.”