60 seconds with.....Adrian Coles
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Mortgage lending by building societies is depressed - £1.5m in May compared with £3.5m at the same time last year. do you expect it to remain so?
I think lending will remain low for some time - certainly the rest of this year. But there are good things happening in the mortgage market. Nationwide’s most recent house price index shows prices are not falling as rapidly as they were and you could argue that they are beginning to stabilise, although we should wait a few more months to be certain of that.
Should societies have diversified into non-mutual activities as much as they did?
The rate of diversification has varied between societies. For example, Skipton diversified sensibly and profitably. And Nationwide has done a similar thing with its additional banking services you wouldn’t normally associate with a mutual. But with the benefit of hindsight some societies should not have diversified into imprudent commercial lending.
What do you think of the FSA’s proposed 130% rental cover as a minimum for mutuals?
Societies generally operate at around 120% rental cover so this would be a further strengthening of requirements. That being the case, if a limit is deemed necessary by the Financial Services Authority we would argue for a minimum figure of 120%, although much society lending would be above that figure.
Do you think there should be more of a level playing field between banks and smaller societies?
Each set of institutions has its own problems. Large government-backed banks have more of an aura of safety in the eyes of savers and investors than societies that have not had state support. This is an example of a distorted playing field that we would like to see rectified as soon as possible.
If we are to have banks that are seen as too big to fail in the future, they should hold higher levels of capital than institutions that can be seen as possible failures such as Dunfermline. After all, they could be permanently state-backed and in that sense there’s a case for having them regulated more closely than smaller societies.
Given that the majority of demutualised societies have now fallen by the wayside, do you feel a sense of vindication that mutuality is the right model?
Yes.
