Tory seeks funding equality for mutuals

Conservative backbencher Sir John Butterfill has posted a Private Members Bill to level the playing field between the mutual sector and other financial organisations.

The Bill seeks to amend the Building Societies Act to enable the relaxation of limits of the prescribed non-member funding limits, currently standing at 50%.

This would enable them to compete on a level playing field with banks, which are not similarly constrained if a lowering of the 50% limit was necessary.

Currently, half of mutuals’ funds must come from their own members’ deposits, meaning no more than half of their funding can come from the cheaper wholesale market. If, for example, long term fixed rate deals were to become more popular, building societies would not be able to compete with banks.

This ruling would move the Act to second legislation, meaning a fast amendment would be possible if the market were to turn.

It will also look to enable specified categories of mutual organisation to transfer engagements to one another, whilst still retaining the mutuality and membership core of the business.

It comes after an inquiry conducted by the All Party Parliamentary Group for Building Societies and Financial Mutuals, which established a consumer case for a strong mutual sector.

It noted that not only did financial mutuals consistently finish higher in best buy tables than non-mutuals, but also that mutuality has been extremely beneficial for competition in the financial sector as a whole.

Sir John says: I believe that financial mutuals represent a valuable and responsible part of the financial services industry.

Not only have they traditionally outperformed plcs in customer pricing, but their market power promotes competition, delivering lower charges and lending rates across the industry as a whole.

“This Bill offers them the flexibility to compete more effectively, a development which can only bring benefits to consumers.