CHECK AGAINST DELIVERY
I am delighted to be standing here today as your new Chairman.
I would like to start by thanking David Cutter for his excellent work as Chairman of the Building Societies Association this last two and a half years.
Having shadowed David for some months I can vouch for him being a tireless and committed champion for building societies. He’s going to be a hard act to follow.
Now I have been involved in building societies for the best part of 25 years, both at the Bristol and West and at the Bath.
For a brief spell, working at the Bristol and West meant that I was part of a demutualised organisation, when that society was taken over by the Bank of Ireland.
So I’ve had the benefit of seeing up close the difference between a customer-owned firm and a PLC in a “before and after" context. It was an experience that made me truly appreciate the value of mutual building societies
Back in the day at Bristol and West we had in our head office a beautiful ceramic wall panel created by a West Country artist. It was about the size of a four-sheet poster and bore the inscription, "When we build, let us think that we build forever”.
That mural is still there but demoted to a wall in the staff canteen.
With the name of the Woolwich now disappearing altogether, there really is very little left of those 10 societies that demutualised.
But those words "When we build, let us think that we build forever” go to the heart of mutuality, or as we now more often call it, customer-ownership.
For me, the mutual difference is deep-rooted within the culture of our organisations, steering day to day operational decisions, often to the degree that it just becomes second nature to us, and is just “how we do business round here”.
Much of the difference is about working for the long term rather than the short term. Long term value for members; long term planning for the business and measuring success in the long term.
We’re not in it for the quick buck.
Of course, building societies have to be run commercially, and profitably. I'm not going to pretend that this year’s P&L isn't important. It is.
But maximising this year’s profit to the detriment of our members and our longer term sustainability is not.
And building societies don't have an exit strategy planned to achieve that big payday on the sale or flotation of the business.
Most societies are long past their 100th anniversary and many beyond their 150th. And we run these businesses with a view to them being around for a good while longer.
This is important if we consider the shape of the financial services sector we want, and consumers deserve, in the future.
To deliver competition and enhance financial stability I believe that we need a diverse banking industry – diverse by product, for sure, but also diverse by company size and by ownership structure. Having more challenger banks coming into the market is excellent, but how many of them are building their businesses to be around decades or a hundred years from now?
Will we simply see the large and established gobble up the small and new, creating more of the same, I wonder!
It can sometimes be tricky to articulate, but we really do see things in a different way.
We're into developing long term relationships; we value business strategies that give us resilience and long term stability. Our job is to leave our businesses in a better shape than we found them.
We are the stewards of the financial services industry as well as being innovators and our view is that you need both characteristics to create a thriving, successful industry for consumers.
Our mainstays are pretty simple - a home for your money, and money for your home. For us it’s about working for the benefit of our members, optimising profit and making the business sustainable.
Three things have come to the fore in recent months which have brought all of this home to me very clearly.
The first relates to fines levied by the Financial Conduct Authority in the bank and building society world.
Between 2010 and the end of September this year, fines north of £3 billion have been made, of which only 0.2% were meted out to building societies.
I cannot think that this is a chance statistic. I’m not trying to stand on some kind of pedestal here but I do think it says something about different cultures.
The second statistic that speaks volumes is the fact that since the start of 2012 net new lending by building societies has topped £52 billion, compared to £7 billion from all other mortgage lenders put together.
I suspect that this reflects the fact that, better capitalised, Building Societies have been able to be more active in the market.
When the going gets tough, we still keep lending. It’s what we do.
Of course we have to manage our lending criteria to fit the demands of the economic cycle but our instinct is to keep finding ways of helping the new generation of first time buyers.
After all, one of our core purposes is to support home ownership.
The third statistic that has spoken to me is the difference in average rates paid to savers between banks and building societies.
This is information that was touched on the Financial Conduct Authority’s cash savings review.
Data shows that building societies have a more impressive record than the major banks in rewarding the loyalty of their existing customers.
We have a particularly good story to tell in the cash ISA market.
Looking ahead, one area where I think we will be able to tangibly demonstrate our difference is in lending to older people, both into and in retirement.
As some of you may have seen in the Sunday Times at the weekend, today the BSA publishes an interim report into this topic, one that is becoming ever more important to society and the way we live.
Lots of factors are coming together to make it timely to take a new look at how lenders, regulators and government handle lending to older people.
Here’s just a few to give you a flavour of what in a few years’ time will be one of the biggest societal shifts going.
By 2034 almost a quarter of the UK population will be over the age of 65. By current measures this means over 17 million of us.
Even today, half of our 25-34 year olds think they will need a mortgage that lasts into retirement. This is at least partly due to house prices. The UK average price now tops £195,000 and half a million in London.
As a result of prices, the average age of an unassisted first time buyer is rising and many more borrowers are looking to borrow over 30-years or more to make the mortgage more affordable.
We’ve been working together as a sector to look at this issue and we’re making some early recommendations for change today.
Some put the ball firmly in our court; others can only be delivered in partnership and a few may require regulatory change.
The FCA has been involved in this preparatory work and I’ve been impressed with the open-minded and participatory approach.
We are all looking at solving problems for consumers.
I won’t read out all nine recommendations – copies of the report are available here - but they include us reviewing our maximum age policies;
Working with insurers to mitigate the different risks involved in lending to older borrowers and crucially forming a cross industry alliance with others who are also focused on the needs of these people.
So this report marks the start not the end of a process.
In September and October we held two very well attended round-tables at the Labour and Conservative party conferences taking in views from a cross-section of groups, including charities; housing associations; equity release providers and other mortgage lenders.
Their views will now contribute to the next stage of the project – working with others on those recommendations to deliver progress for those who want, need and deserve a home of their own.
Although I have deliberately done so today, I’m generally not one for banging on about mutuality per se. The word itself can generate blank looks.
But what I do know - because they tell me - is that when customers touch our businesses they know that something positive and different is going on.
I’d like to think that in my role as Chairman of the BSA, I’ll be able to build on the good work done by others over the years to explore, explain and protect these differences.
I hope, too, that we can count on support from the Government to continue developing this difference and always have customer-ownership considered side by side with the PLC model in relation to legislation and regulation.
For our part, we are keen to work alongside a Government that is so clearly committed to home ownership.
I am delighted now to introduce Harriett Baldwin, MP for West Worcestershire and since the formation of the Conservative Government after the General Election, Economic Secretary to the Treasury and City Minister.
Within the Treasury it is Harriett who has responsibility for financial services policy and the overall strategic relationship with UK financial services.
Harriett – welcome.