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Mutuals demand parity with banks

Building societies have welcomed the coalition Government’s pledge to promote mutuality but say they do not need to be given an advantage, just granted a level playing field with banks.

Building Societies Association head of mortgage policy Paul Broadhead says the Financial Services Compensation Scheme levy is a key area where mutuals are unfairly treated by comparison with banks.

The BSA has been lobbying hard for changes to the way the levy is calculated as it is currently based on deposits held by an institution, which penalises the mutual funding model.

Banks that get more of their funding from the wholesale markets pay less to the FSCS.

Broadhead says: “First of all, there is the FSCS. Building societies pay a disproportionate amount to banks. Because building societies need to fund at least 50 per cent of their mortgage lending from savings, they pay a proportionately higher levy than the banks, which is unfair. We think that should be overhauled and reformed.”

Stroud & Swindon Building Society sales and marketing director Linda Will says: “It is ironic that the Liberal Democrats want proportional representation in the voting system, as this is what we want with the FSCS. We just want parity in regulation. No one wants any advantages, we just want a level playing field.”

Will is also calling for fairer treatment for building societies on capital and liquidity requirements. She says: “There is still concern that the building society sourcebook’s provisions for capital and liquidity are much more stringent than those for non-building societies.”

Broadhead also calls on the Government to consider remutualising Northern Rock as part of its plans to boost the mutual sector.

He says: “The Government should really consider returning the nationalised Northern Rock to the mutual sector. The previous Government thought that was a good idea.

“The coalition has said that it wants to encourage a stronger mutual sector and we share that view. That would be a step in the right direction. Keeping it outside the banking sector would be good for competition.”

Broadhead says the coalition should also to discourage unfair competition with restrictions on National Savings & Investments.

He says: “Over the past couple of years, through the credit crunch and bailouts, the mutual sector has seen unfair competition from the banks and nationalised institutions in raising money from savings.

“We really would like some of the nationalised banks to fulfil the lending commitments they have made to the Treasury as part of the bailout.

“The previous Government set NS&I, which is essentially the Government savings arm secured by the Treasury, a zero-net financing target so that it could not increase its balances any more. At the very least, the new Government should maintain that.”

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