Media and Public Affairs
Liberal Democrat Banking Plan
Liberal Democrat Shadow Chancellor, Vince Cable MP (Lib Dem, Twickenham), set out the Liberal Democrat plan for the banking sector at the end of February. In his speech, he cited the value of mutuals and argued there is a strong case for the remutualisation of Northern Rock, so long as a repayment plan is established.
Under the heading public ownership, competition and diversity, he said:
“There is a case for a more varied banking ecology. Those mutuals which resisted the - disastrous - lure of conversion continue to provide a different and, for many, more attractive business model without the pressures to produce shareholder returns. A strong case is being made for transferring nationalised Northern Rock back into a mutual. Our objection has been that mutualisation of the nationalised banks does not produce the return of cash to the taxpayer, but we must remember Northern Rock is in a very different situation to Lloyds and RBS. £23bn of Government money has been pumped into Northern Rock vastly in excess of its market worth even at the height of the credit boom. There is no way this money will ever be recouped purely from a re-flotation. As long as the Rock was re-mutualised in such a way to guarantee that it would continue to repay the Government, there is no reason - at least in principle - why it could not do this as a building society.” The full speech can be accessed here http://www.libdems.org.uk/speeches_detail.aspx?title=Vince_Cable_sets_out_the_Liberal_Democrat_plan_for_the_banking_sector&pPK=98fe99d4-6a12-4fe6-81bf-31eb352edd76
Mutuals Manifesto 2010
The Mutuals Manifesto 2010 was published on 1 March. This manifesto is the first of its kind and brings together the views of various trade associations, including the BSA, and mutual organisations. It is a challenge to the UK’s political parties to show how they plan to support and nurture the mutual sector and is being used in conversations with the main parties in the run up to the general election.
The manifesto calls upon the Government to commit to do the following:
Ensure that mutuals are understood and receive equal treatment across all Government departments.
• Create a Government Office for Mutuals with a designated Minister for Mutuals
• Ensure that mutual sector legislation keeps pace with company law reformUse its influence with Regulators to make sure that they act in a way that respects diverse forms of ownership
• Government should commit to alter the terms and approach of Regulatory Authorities to match Government policyPromote mutual ownership as a way of serving the public interest
• Government should support the Commission on Ownership
• Government should evaluate returning Northern Rock to the mutual sector
• Public services should be supported to convert to mutuals by a business conversion unit
• A Public Services Regulator should be established to drive quality corporate competence
The manifesto can be viewed here http://www.bsa.org.uk/members/circular/mutualsmanifesto.htm
Treasury Select Committee (TSC) Inquiries.
Appearing before the TSC as part of its financial institutions - too important to fail? Inquiry, Mervyn King, Governor of the Bank of England, was questioned on his views on narrow banking and deposit protection. Mr King stated “I think what that means for narrow banking is that this is very much really, in a sense, up to you, that what we want is we want certain bank accounts to be functional such that those who put their money into it know that it is completely safe and guaranteed and there is no risk. You cannot do that by investing in risky assets, so I think that the idea of saying to people, "Your deposits are completely safe, irrespective of what the bank does with them" is not likely to be a fruitful direction in the future, and I think we need some vehicle where people feel that their deposits, whatever they are, will be safe.”
The TSC have recently announced two new inquiries Mortgage arrears and access to mortgage finance: follow up and The end of cheques?
Financial Services Bill 2009-10
The Bill has completed its passage in the Commons and is currently in the Lords at Committee stage.
The BSA was quoted recently in a Commons Committee stage debate. In discussions about the Council for Financial Stability and the structure of the Tripartite, John Howell MP (Con, Henley), said “the most damning quote of all is that from Adrian Coles of the Building Societies Association, who said that the proposal was a ‘modest measure’ and that of itself it is not going to prevent the next bubble, it is not going to prevent the next banking crisis”. Following on, Mark Hoban MP (Con, Fareham) said “The evidence from Mr. Coles shows that even those who are regulated by a part of the structure - the FSA in his case - lack confidence that the outcome will be any better than that under the standing committee.”
In the Lords Second Reading, Lord Sawyer praised mutuals for their active member engagement policies, calling them the ‘hallmark of the mutual sector’.
Conservatives – New Economic Model
In February, the Conservatives set out ‘eight benchmarks for Britain’, one of which was to create a safer banking system that serves the needs of the economy. They state:
We will reform the regulation and structure of the banking system to ensure lower levels of leverage, less dependence on unstable wholesale funding and greater availability of credit for small and medium sized businesses.
We will abolish the failed tripartite system of regulation and put the Bank of England in charge of prudential supervision. We will restore the Bank’s historic role in monitoring the overall growth of credit and debt in the economy. A new Consumer Protection Agency will take over responsibilities for protecting consumers of financial services that are currently split between the FSA and the OFT.
We will pursue international agreement to put in place an insurance fee on banks and to prevent retail banks from engaging in large scale proprietary trading that puts the stability of the bank at risk.
We will increase competition in the banking industry, starting with a competition review of the sector that will inform our strategy for selling the government stakes in state-controlled banks.
