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Waking up to a post Rock world

According to John Murray, last year’s BSA annual conference was an insomniac’s dream but this year the organisers have had a wake-up call and have put together an event in Manchester that will have value for all lenders – not just building societies

The reason the Building Societies Association chose Manchester for its annual conference when Liverpool, this year’s European City of Culture, was a favourite for many of its members, probably has more to do with the comfort factor than pleasing the crowd.

Manchester was the venue for a highly successful BSA annual conference a few years ago but for those of us who like to stray from the plenary sessions (and there are a few) Manchester is an interesting city.

True, it won’t have the Super Casino that was promised under Blair but rescinded under Brown, but that shouldn’t detract from its appeal. Building societies in any case are traditionally prudent and are so risk averse these days that few would want to chance their hand at Black Jack or roulette, which might seem like kid’s stuff after dealing in the derivatives market anyhow.

Even so would it be wise for anyone other than a building society executive to gamble on spending two days in Manchester with the BSA?

After being ‘somnolised’ at the BSA’s annual bash at Bournemouth last year, many delegates, including some from the building society sector, were considering saving on their delegate fees in 2008.

But before putting your wallet back into your pocket think again. Last spring the UK mortgage market looked a lot more comfortable than it does today and so a degree of complacency was perhaps inevitable.

A glance at this year’s conference programme reflects the sea change in the market. BSA director general Adrian Coles and his team have put Bourne-mouth and the past (as if that town isn’t a metaphor for the past) behind them.

Tomorrow and the day after are firmly on the agenda – at least on the first day – and, post Northern Rock, the ability to read the future and think the impossible are desirable qualities to have in any executive team. Ironically, the man who didn’t see the Northern Rock crisis coming, Hector (warrior of the Illiad?) Sants, chief executive of the Financial Services Authority, will be opening the conference with a lively and a pithily eloquent session on the future of regulation, to judge by a recent Radio 4 interview.

I jest, of course. In that programme Sants said: “I don’t think markets are ever going to return to the way they were”. He obviously doesn’t have much faith in himself, or the government either. Perhaps Coles chose Sants because he was certain Sants really wanted to put the past behind him. Whatever the reason, it’s a safe bet the future of regulation will be a long one, the principles-based approach not withstanding, because the FSA now has a lot to prove.

It is depressing but however you look at the situation, the FSA is on the defensive so it is important to understand the psychology of an insecure institution and the way it is thinking.

The future gets better and more interesting with the next session. Following the hard opening act is David Smith, chief executive of Global Futures and Foresight at Unisys. He should not be confused with David Smith, economics editor of the Sunday Times whose regular column in Lending Strategy can be found on page 18 of this issue.

Unisys invests a huge amount of resources into researching what HG Wells so neatly summarised in the title of his book, The Shape of Things to Come. Wells, one suspects, would have been intrigued by what Smith may have to say about a world in which the Yellow Peril of his era is becoming a major driver in the global economy and new business models are emerging that challenge our ideas of how we work and live.

Another determinant factor is the performance of our own economy. At the moment it is full of uncertainty so it is just as well that the economist that the BSA has invited to unravel the data and evidence of conflicting trends is someone who also has experience of reading the mind of Tony Blair (yes, really) and who played ‘piggy in the middle’ between Blair and his chancellor for six out of Blair’s 10 years in Downing Street.

I’m of course referring to Derek Scott whose book, Off Whitehall, published in 2004, might give us some clues of what to expect of the man in May. For example, in it he describes chancellor Brown as “obstructive and deceitful” in his dealings with Blair and of the PM he states: “I saw one of my tasks as being to make Blair more at ease with some broader economic issues. I was more successful in some areas than others.”

Scott describes Blair’s dilemma when, disadvantaged by his poor understanding of economic issues and Brown’s apparent mastery, he summoned his chancellor to No 10 before the 1998 budget to find out what it would contain. Brown apparently procrastinated for about 20 minutes, forcing Blair to ask: “Gordon, what about the budget?”

According to Scott, the chancellor “growled ‘I haven’t made my mind up yet’. The prime minister, leaning forward from the couch on which he was sitting, eyebrows raised with a disarming smile and head tipping slightly from side to side in the manner portrayed by Rory Bremner, simply said: ‘Give us a hint, Gordon.'”

Scott observes. “I can think of no other prime minister who would have put up with such behaviour.”

After what is promised by such a morning session at the BSA conference, there is a risk that the rest of the day’s programme could be an anti-climax.

The two concurrent post-lunch sessions, however, present delegates with three choices – sit in on either the one on climate change, or the session on the future of distribution, or catch up with people at the bar or business exhibition. You can always pretend you were at the ‘other session’ if you are missed.

As someone suffering badly from global warming fatigue (I quite like bottled water and find plastic bags useful at times) I’d be inclined to sit in on the session on distribution because that’s where the business comes from.

Moreover, it will include a paper by John Howard, current chairman of the Financial Services Consumer Panel on the Retail Distribution Review. According the Intermediary Mortgage Lenders Association the RDR, although focused initially on the investment market, is being implemented without a proper assessment of its impact on the UK mortgage market, creating an environment of uncertainty as to the future shape and structure of that market.

On the other hand, with two million homes built on flood plains and more planned, lenders have to understand the risk that climate change presents to their underlying assets.

The third option – retreating to the bar – could be a lot more fun and leave you refreshed for a plenary session that Coles has organised to whet the appetite before the annual dinner.

Yes, there is to be a pre-dinner presentation by journalist, broadcaster and political analyst David Aaronvitch who has a regular column in The Times. His topic will be the psychology of leadership and having interviewed our political and industrial leaders on Newsnight, Pick of the Week and Sunday Supplement, he will no doubt have some interesting insights about what makes them tick.

Day two starts with the depressing stuff. Andrew Hilton, director of the Centre for the Study of Financial Innovation, extrapolates the lessons we can learn from what happened at Northern Rock and the credit crisis. Hilton is followed by Doug Duncan, senior vice-president and chief economist of the Mortgage Bank of America, who focuses on where the contagion started – namely, in the sub-prime mortgage market of America.

The subtitle of his presentation is what happened, why, and where are we now? Given that at the last G7 summit it was estimated that the immediate fallout from the sub-prime crisis was around $400bn in losses and that residual and related losses were likely to reach around $3trn, wouldn’t we like to know?

The best of the rest
After the big questions and coffee the BSA serves up concurrent seminars so delegates are left to choose between improving operational efficiency and leadership and staff development. If this leaves you indecisive the best solution might be to attend the leadership session to pick up a tip or two on decision-making. On the other hand, John Seddon, the founder of Vanguard Consulting, who opens the seminar on improving operational efficiency, is something of a maverick who hasn’t much time for the metrics of the business, and especially of call centres, so there’s a chance that he might entertain as well as inform.

In the afternoon programme of the second day we are back to concurrent seminars. There is the future of the mortgage market with the tombstone spot going to Ray Boulger, John Charcol’s senior technical manager who likes to talk in details, and an incestuous session on customer needs and satisfaction with mutuality being the means to the end.

The use of the word incestuous isn’t meant to be disparaging – the event after all is aimed at building societies. But for other delegates the obvious choice is the session on the housing and mortgages markets which also features a paper on efficiency and effectiveness in mortgage lending by Simon Walker of KPMG, who is a regular contributor to this magazine, and a paper on the outlook for the housing market by Fionnuala Earley.

Earley is chief economist at Nationwide Building Society and brings to her analysis a breath of experience as an economist with the Council of Mortgage Lenders and the European Mortgage Federation and isn’t to me missed.

BSA Annual Conference – key facts

Where and when. Manchester Central, 7-8 May 2008.

Who can attend. Despite its name it is not a closed event and other lenders are welcome.

Hospitality. This is legendry – enquire about the annual dinner.

When to be there.
The business exhibition opens at 10.30am on 7 May but don’t miss, starting at 11.00: The future of regulation – Hector Sants. chief executive, FSA; The day after tomorrow – David Smith, chief executive, Global Futures and Foresight, and The future of the economy – Derek Scott, managing consultant, Europe Economics.

At 4.30pm there will be The psychology of leadership – David Aaronvitch, broadcaster

Starting at 9.30am on 8 May there will be: Northern Rock: the lessons – Andrew Hilton. director, Centre for the Study of Financial Innovation; Sub-prime mortgages in America: what happened and where are we now? Doug Duncan, senior vice-president and chief economist, Mortgage Bankers Association of America.

Finally at 2.00pm on 8 May there will be:The future of the mortgage market with Ray Boulger, senior technical manager, John Charcol; Simon Walker, partner KPMG; and Fionnuala Earley, chief economist, Nationwide Building Society.

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