Incoming Building Societies Association chairman John Parker of Stroud and Swindon Building Society is keen to use his experience as chief executive of one of the smaller societies to help alleviate regulatory pressure on those societies with fewer resources.
He says: “The pressure of regulation is acute for smaller societies. The large societies such as Nationwide will have separate compliance, marketing and strategic planning departments. For a smaller building society, this might all be done by the chief executive and it is often the case that he might get involved in mechanics and not realise he is going in the wrong direction.”
Parker has been in the industry for 20 years and has seen Stroud & Swindon grow to become the 15th-biggest society with £2.08bn in assets so he feels he is well placed to look at regulation from the perspective of smaller societies.
Parker follows in the footsteps of the often plain speaking Skipton Building Society chief executive John Goodfellow as chairman of the BSA.
Parker, too, is clearly not afraid to speak his mind, calling for an appeals mechanism at the Ombudsman, particularly if a precedent is established through one of its rulings.
He also stands firm with Goodfellow on the issue of mortgage endowment compensation. Goodfellow has said that he believes any endowment compensation should be paid directly into the shortfall to stop claimants spending the money on something else and coming back for more compensation in the future.
Parker says: “I feel there is a risk if compensation is not applied straight into the mortgage deficit.” But he believes endowments are a sensible product, having bought one himself. “Our experience is that endowment mortgages worked very well – the real problem is the equity crash.”
He is concerned that actions taken 20 years ago are being judged by today's standards and says this could mean very few companies end up being willing to take risks with product development.
He says: “There is a danger that product ranges could end up being limited by regulation.”
Parker's deputy chairman, Nationwide chief executive Philip Williamson, has revealed his anxieties about the misselling of equity release but Parker believes there is a place for the product in the market, fearing that regulation could stop lenders offering sensible financial solutions to real problems.
The continued increase in endowment complaints is not the only challenge facing the society sector at the moment. With regulation just around the corner, Parker is bound to have a busy year.
He says: “The problems of the past mean the Government feels the need for a stronger regulatory regime. One danger for us is moving to the more general FSA regime from that of the Building Societies' Commission – there will be a lot more interpretation for us and so more risk, more complexity and more cost. It used to be considerably simpler – the Building Societies' Commission did an excellent job.”
Of course, there are the recommendations of Professor David Miles concerning long-term fixed rates which could herald significant changes for lenders if they are acted upon.
Although Parker says he is pleased with Miles' app-roach, he does not think there is a place for 25-year fixed-rate mortgages.
He says: “Miles is now saying he believes 10-year fixed-rate mortgages would help the UK economy. But four years ago, 10-year fixes would have been at 7 per cent and I think a lot of consumers would now be saying they were missold when looking at the cheaper rates on offer today.”
He agrees with Miles that the public needs to be educated to understand financial risk but says this is going to be a real challenge as the average consumer's understanding of risk is very low.
Parker is sanguine about the busy year ahead of him. He says: “There is a possibility that regulation will become all-consuming – our role is to map out very carefully where we think the strategic risks are and look at the broader issues.”