Building societies are customer owned financial service providers rooted in communities across the UK.

They help people to build their financial resilience and achieve their aspirations, particularly home ownership. And with the recent acquisitions of two banks, mutually owned business banking is now back on Britain’s high streets.

Building societies have grown their market share since the financial crisis, from 18% to 29% of mortgages. They can deliver greater impact, but to do this they need better access to capital that is consistent with customer ownership.

We call on HM Treasury and the regulators to work with the sector to develop deeper and more liquid capital markets for mutuals and co-operatives.

Unlocking access to genuinely mutual pools of growth capital will open the door to support more people across the country to achieve the security of homeownership and financial resilience. The FCA should remove barriers to retail holdings of mutual capital, such as CCDS.

The PRA must review how capital regulation is applied to customer-owned businesses.

Building societies are required to focus on relatively lower risk lending, and they are not incentivised to maximise short term profits. This mutual difference should be recognised in the application of regulatory requirements which are proportionate to the risks posed by mutuals to the regulators’ objectives. The current one size fit all application of international capital, liquidity and leverage standards discriminates against building societies relative to the shareholder owned banks.

The PRA should review and tailor aspects of the Basel framework’s requirements to be more proportionate to the risks building societies pose, creating a genuinely level playing field. Building society law should also be modernised so that it does not put in place barriers to the sector adapting to future shifts in technology and consumer behaviour.

Building societies should be involved in relevant policy development at a national and local level.

They can bring member insights to critical issues such as local housing development, improving the energy efficiency of homes, financial education and inclusion, and the sustainability of our high streets.

With improved access to mutual capital and the enabling environment outlined in this plan, a larger building society sector will innovate and diversify, helping more people to build their financial strength and to move and buy their homes, while playing a transformative role in local economies for decades to come.


 

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