The Building Societies Association has written to the chief executives of mutuals offering guidance on answering tricky questions about potential losses.
As societies gear up to reveal their annual results for 2009 the BSA is offering them answers to questions such as ’Do you have to consider a merger with another society?’ and ’Shouldn’t your chairman resign?’.
The BSA has told chief executives that the question and answer document is intended as a reactive brief to be used with the media when reporting losses.
The nine-page guide lists a number of reasons why a society might report a loss this year including pressure on margins, Financial Services Compensation Scheme levies and the cost of higher liquidity holdings.
If asked whether their chairmen or boards should resign, the BSA advises societies to respond: “Absolutely not – the board has managed the society very prudently in a difficult environment.”
If asked about an increase in their SVR, societies are advised to say: “We need to be fair to both borrowers and savers, and the decision to increase our SVR was not taken lightly.”
It also sets out answers for societies asked whether their directors will still receive bonuses following losses.
And to the question ’Will you be closing any branches?’ the trade body suggests that if a mutual is planning closures it should respond: “It is too soon to speculate on individual branches.”
A spokeswoman for the BSA says the guidance has not been issued in anticipation of any substantial losses among societies.
She says: “As a trade association it is our job to offer guidance on a range of issues and this is just one of them. We are not expecting huge losses among mutuals. Obviously there will be some but there will also be a lot of positive results.”
She adds that the guidance is a follow-up to similar advice the BSA offered last year.
Principality Building Society was one of the first mutuals to release its 2009 results last week. It made a pre-tax profit of £14.3m for 2009, up 50% on last year’s figure.