Building societies against new regulations
The Building Societies Association (BSA) has expressed its concern over new regulations, proposed by the Financial Services Authority (FSA), saying they will disadvantage the industry.
Proposals from the City watchdog include plans to restrict riskier types of lending by building societies, which according to the BSA, would have a “discriminatory and anti-competitive effect in the mortgage market”.
In a formal submission to the FSA, more than 50 mutual lenders criticised the FSA of weakening the sector by “uniquely fettering their ability to compete”.
Director general of the BSA, Adrian Coles, comments: “The FSA wants controls to make sure mutuals operate safely in the future, but if you start restricting buildings societies, it is hard for them to diversify and the sector won’t be able to react to market drivers.”
The proposals come after Scotland’s Dunfermline Building Society was hastily taken over by Nationwide at the end of March. However, the credit crisis has resulted in a number of smaller societies being rescued by their bigger rivals.
Cheshire and Derbyshire building societies have been swallowed up by Nationwide, while Britannia Building Society has completed its merger with Co-operative Financial Services.
In June, West Bromwich Building Society agreed a deal that saw the 160-year-old institution saved from collapse.
In the meantime, in the last year alone local authorities have withdrawn over half the money they had on deposit with building societies.
Official figures show that councils had £5.6 billion deposited with mutuals in July 2009, compared with £12.7 billion in July 2008.
Finally, in April Moody’s downgraded the credit ratings of nine building societies, due to concerns they will be hit by losses due to the housing market slump.