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Our Mutual Friends

Our Mutual Friends. The Building Society Approach to Mutuality Adrian Coles. Director-General, The Building Societies Association www.bsa.org.uk. Building Society Legislation. Own legislation; not Companies Act

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Our Mutual Friends

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  1. Our Mutual Friends

  2. The Building Society Approach to MutualityAdrian Coles Director-General, The Building Societies Association www.bsa.org.uk

  3. Building Society Legislation • Own legislation; not Companies Act • At least 50% funded from members; in effect, maximum 50% wholesale funded – but may change in the long term • 75% of lending on residential property • Few powers constraints • Members are individuals with savings or mortgage accounts; other customers are not members; one member, one vote • Conversion procedures

  4. Mutuality in Building Societies – Basic Messages • No shareholders, no dividends • Lower margins • Better products • Consistent value • Lower risk • Retain branches • Regional and organisational diversity • Competitive impact – BS activity constrains the banks

  5. Six Pillars of Mutuality • Democratic engagement with members • Mutual performance indicators • High levels of customer service • Treating Customers Fairly • Corporate Social Responsibility • A mutual culture

  6. Current Challenges • Savings outflows, following record inflows • Falling house prices and mortgage balances, and rising arrears (but not all societies) • FSCS payments reduced pre-tax profits by 63% in 2008 • Structure of the industry - some weaker societies absorbed by stronger societies, Dunfermline wound up • Profit-participating capital introduced by FSA • Last two without democratic participation

  7. Current Positives • Demutualised model discredited. Windfalls now worth little. Demutualised institutions largely disappeared • First merger across a mutual demarcation line – with a vote • BSA widens remit to cover more mutuals • Mutual trade bodies working together more closely • Banks bailed out by government; building societies largely addressed their own problems • Much stronger balance sheets than banks – FSA says • Widespread sympathy for mutual approach • Now is the time for mutual values – remote from “The City”, trusted, simple, straightforward, democratic

  8. The Building Society Approach to MutualityAdrian Coles Director-General, The Building Societies Association www.bsa.org.uk

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