Media and Public Affairs
Public Affairs
Public Affairs Activity
November, December 2009 and January 2010|
Date:
9 Feb 2010
|
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BSA Parliamentary appearances
Two Parliamentary Committees sought the views of the building society sector in December. The BSA’s Director-General, Adrian Coles, appeared before the Scottish Affairs Committee on its inquiry into banking in Scotland, as well as the Financial Services Bill Public Bill Committee.
Speaking in front of the Scottish Affairs Committee, the Director-General told MPs how societies feel angered by the unfair nature of competition from nationalised and part-nationalised banks. This followed on from Stephen Hester, RBS Chief Executive, informing the Committee that RBS “has outperformed most of its competitors in improving its performance in savings.”
At the Financial Services Bill Public Bill Committee the subject of living wills for financial institutions was discussed. The Director-General argued that most building societies are straightforward, non-systemic, institutions and therefore should not be required to produce a living will.
The full transcripts of the sessions can be viewed via these links: Scottish Affairs Committee
http://www.publications.parliament.uk/pa/cm200910/cmselect/cmscotaf/uc70-ii/uc7002.htm
Financial Services Bill http://www.publications.parliament.uk/pa/cm200910/cmpublic/finser/091210/am/91210s01.htm
Financial Services Bill
The Financial Services Bill is currently in Committee stage in the House of Commons. The BSA has provided a written briefing to the Bill Committee, as well as giving oral evidence. In the Committee session on 12 January, John Howell (Con, Henley) quoted the BSA on the subject of living wills. He said “Many building societies are small. The BSA questions the proportionality of the measure for such firms. Does he agree that it would be much better to discuss the matter with a cost-benefit analysis covering them?” The Minister, Ian Pearson MP, replied “We anticipate that the scope of recovery and resolution plans will be expanded to other types of firm. The Government intend to make an order setting out the timetable after consulting with the Financial Services Authority. By taking that approach, we are enabling the FSA to comply with the duty to make rules in a risk-based and proportionate manner.”
EDM 257 - Remutualisation of banks
An Early Day Motion laid by Ian McCartney MP (Lab, Makerfield) has gained the support of 68 MPs.
It reads “That this House congratulates the success of mutuals and recognises their important contribution to the UK's economy; notes that one in three citizens is a member of at least one mutual and the sector has continued to grow despite the dramatic economic backdrop; further notes that overall revenues now exceed £98 billion which have risen from £84 billion in 2008 and mutuals are going from strength to strength and provide security and choice for consumers; further notes there are currently 52 mutual building societies in the UK and collectively they have 22 million members, employ 42,300 people and have assets of £341 billion; further notes that it is the ethics of the principle of mutuality that make these institutions so strong; further notes that not one building society survived as an independent British Bank after the regrettable demutualisations of the 1980s and 1990s; and urges the Government, as part of the restructuring of the banking sector, to enable and encourage the remutualisation of a significant part of it, including the conventional banking side of Northern Rock.”
Treasury Select Committee evidence session - RBS, Northern Rock, Lloyds Banking Group
The Treasury Committee took evidence from Royal Bank of Scotland, Northern Rock and Lloyds Banking Group on 12 January. The Committee took a fairly typical line of questioning, with subjects including bonuses, ‘casino’ banking, restructuring, arrears levels and lending to small businesses.
Witnesses were Stephen Hester, Gary Hoffman and Eric Daniels. In his session, Gary Hoffman, Northern Rock plc CEO, confirmed no deadline has been set for freeing Northern Rock from taxpayer support. He said he believed Northern Rock could be a force to be reckoned with in the future. Sally Keeble MP (Lab, Northampton North) asked Mr Hoffman if he believed the Government guarantee should now be removed as it was distorting the savings market. He responded saying the Government is right to review this, but it’s their decision. He also confirmed that there are no arrears in Northern Rock plc. The session can be viewed again online here http://www.parliamentlive.tv/Main/Player.aspx?meetingId=5532
Treasury Select Committee: Inquiry into the Presbyterian Mutual Society
The Treasury Committee is to take evidence on the Presbyterian Mutual Society in Belfast on Monday 18th of January. A Ministerial Working Group has been set up which contains the Chief Secretary to the Treasury (chair), the Northern Ireland First Minister and deputy First Minister, the Secretary of State for Northern Ireland, the Economic Secretary to the Treasury, the Northern Ireland Minister for Finance and Personnel and the Northern Ireland Minister for Enterprise, Trade and Investment.
2009 Pre-Budget Report
The 2009 Pre-Budget Report presented some issues of interest to societies.
The mutual sector
In a move that has surprised building society representatives on the Treasury’s Expert Group (where it was not discussed) the Government proposed the introduction of a specific governance code for building societies and other financial mutuals. We understand the code is to build on the annotated Combined Code published by the BSA.
Banking bonuses
It was announced that where bank and building society employees are awarded a bonus above £25,000 the institution will pay an additional tax of 50% on the bonus.
Mortgage backed securities and covered bonds
The Government announced its intention to explore ways of encouraging more sustainable and transparent UK mortgage-backed securities markets and consult on supplementary rules in regards to the covered bond market.
Support for Mortgage Interest (SMI) and Stamp Duty Land Tax
The standard interest rate to calculate SMI will be maintained at 6.08% for a further six months. The Government announced an end to the Stamp Duty holiday as of 31 December 2009.
Dormant Accounts Scheme
The Government confirmed the interest of the Co-operative Financial Services (CFS) in running the Reclaim Fund that is central to the Dormant Account Scheme. The Government also intents to commit 25% of funds released through the Dormant Account Scheme to support the delivery of the Money Guidance Scheme.
Treasury Select Committee Inquiry - Financial Institutions - Too important to fail
The Treasury Committee will be taking evidence on the 'too important to fail' dilemma in early 2010. The Inquiry will focus on the extent to which the structure of the current financial system should be reformed, and certain activities regulated, on the grounds of systemic risk. The Committee is seeking evidence on:
- The extent to which banks operating in the UK are interconnected (eg in terms of inter-bank exposure, and risks to customers and, more generally, public confidence in the banking system).
- The relationship between size and risk, and business model (including mutual models) and risk.
- The pros and cons of a legal separation of low-risk banking activities such as the management of retail deposits from high-risk activities such as proprietary trading - often referred to as 'narrow-banking' options.
- The pros and cons of alternative methods of preventing financial institutions from being 'too important to fail' (eg minimum capital and liquidity requirements, 'living wills', taxation) and analysis of their likely effectiveness and feasibility including timescales for implementation.
- The challenges posed by cross-border financial institutions and of ways, including subsidiarisation as opposed to branches, of reducing systemic risk on a European or global scale and the extent to which individual nations, or regional groups, can or should act alone on the regulation of cross-border entities.
