FSA capital rules are anti-mutual, says BSA
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Graham Beale, chairman of the Building Societies Association, has told members that the trade body is determined to challenge the regulator’s “anti-mutual” stance on capital requirements.
Speaking at the BSA’s Annual Lunch today Beale, who is also chief executive of Nationwide, told delegates that the issue of the Financial Services Authority’s proposals on capital and liquidity is the most pressing issue for building societies at present.
He says: “I wish this expert group every success and would encourage the FSA in particular not to back us into a corner by an over-rigid or super-equivalent interpretation of the capital requirements directive.
“Such a policy is, in execution if not intention, anti mutual and we are determined to challenge it.”
Beale argues that the regulator should remember that only one building society has required government support, that being the Dunfermline, and that its rescue was relatively modest compared to the billions ploughed in to support the banking sector.
He says: “I want to make it clear up front that I understand the need for regulatory and prudential change to prevent a repeat of the financial crisis.
“So I am not against change but as a practitioner I am finding it increasingly difficult to interpret the effect of the regulatory change currently in process.
“And my concern is that strategic long term decisions are being put on hold until the landscape becomes clearer, and this stagnation is not good for the UK economy or the evolution of building societies.
“And there is a real danger that the law of unintended consequences will prevail.”
Beale also warns the cost of complying with emerging regulation, as well as lenders being forced to hold more liquid funds, will ultimately hit borrowers the hardest, with consumers forced to bear the cost in the form of more expensive products.
He adds: “I have described how profitability is under pressure and there is little scope to tolerate more strain.”
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