The Building Societies Association has welcomed the government’s decision to exempt societies from having to ring-fence their retail activities from their riskier investments.
Last week, the government published its White Paper on the Bank Reform Bill, which confirmed it intends to push ahead with requiring banks to ring-fence their activities and make them hold 10% equity to risk weighted assets – higher than the 7% required in the global agreement Basel III.
Systemically important banks will have to hold an extra 2.5%, in line with Basel.
But the report says: “Following further analysis, the government believes that imposing ring-fencing requirements on building societies would be unnecessarily burdensome as it would mean that building societies would have to comply with two different sets of legislative requirements operating in substantially the same area.
“Therefore, the government has decided to carve the entire building societies sector out of the ring-fencing legislation.”
A spokeswoman for the BSA says: “Our initial reaction is to welcome the implicit vote of confidence in the building society model.”