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The March of the Mutuals – opportunity or threat?

At the Building Societies Conference in Manchester, BSA CEO Robin Fieth delivered his keynote speech to delegates, focusing on the growth and strength of the mutual sector.

It all depends on how you see it really.  In a business world that has become so dominated by the Friedman Doctrine that corporations exist to maximise returns to their shareholders, limited in their ambition to do so only by legal and regulatory restrictions – and from time to time by public outrage, why should we be concerned about what mutuals and co-operatives are up to?

Let me tell you why we should be concerned – in the positive sense that we should be thoughtful; and why some may feel concerned – in the negative sense of feeling challenged or even threatened.

As nearly 1,000 people gather in Manchester this week for the Building Societies Annual Conference, they will hear about why building societies, credit unions and the wider financial mutual sector should be at the heart of the future of a properly diverse, competitive and resilient UK financial services sector.  And why when you add co-operatives and other mutuals  into the mix, that should extend to every sector of the economy.

We all focus on UK business, not UK PLC.  We all talk about the purpose of business being for the benefit of our communities and our society, not remote, overseas shareholders.  We focus on long-term value and sustainability, not short-term earnings maximisation.  And by long-term, we do not mean five to ten years.  Ours are inter-generational businesses.  Those running mutual and co-operative businesses have genuine stewardship responsibilities for balancing the needs of current members with those of their children and grandchildren, their future members.

Building societies have come back from the financial crisis bigger, stronger, better governed, in many cases with fresh and novel understanding and insight into their purpose and role in society.  Since I joined the Building Societies Association at the end of 2013, building societies have:

  • Maintained the mortgage market when the banks drew back, increasing their market share from 19% to 23%.

  • Helped almost a million people fulfil their dream of owning their own home.

  • Grown their share of the current account market from 6.2% to 10.4%

  • Paid £9 billion more in interest to their members than they would have got from a high street bank.

Should we still call them high street banks?  Building societies have grown their share of high street presence from 15% to 28% as the banks have deserted our towns and communities.

And they have grown their membership by 1.7 million so that there are now more than 26 million memberships of building societies and credit unions in the UK – and over 74 million memberships of mutuals and co-operatives in total.  That’s more than the total population.  On average UK citizens are members of 1.1 co-operatives and mutuals, which I think is pretty amazing.

But some of the reactions to the recent news that two building societies have set out on the road to mutualising bank assets suggest that the growing strength of our sector is rather more threatening to the status quo in financial services.  Threatening to some conventional thinking that building societies should sit quietly in the corner, not cause any trouble, and stick to their knitting.

What we are seeing, assuming the Nationwide Building Society acquisition of Virgin Money and the Coventry Building Society acquisition of Co-operative Bank complete, is the re-establishing a co-operative banking sector in the UK.  We will no longer have to look with envy at other countries with strong co-operative banking and credit union sectors that support small businesses, social enterprises and ordinary people who want and deserve better from their banks.  Countries like Germany, France, Italy, the United States and Canada.  We will have that choice too.

Opportunity or threat?  It clearly depends on your point of view…

Watch Robin deliver his speech:

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