The findings of a study commissioned by the BSA highlight a drop in the diversity across the savings and mortgage markets which was underway well before the onset of the financial crisis.
Academics at the Oxford University Centre for Mutual and Employee-owned Business who authored the report say this decline is damaging the resilience of the financial system and reducing competition for consumers
University of Oxford professor of innovation and knowledge exchange and report author Jonathan Michie says diversity helps to fortify the industry against the threat of contagion as well as offering consumers more competition.
He says: “By both measures the shape of the UK financial services sector has become less healthy since 2004. Although the slide in diversity seems to have been arrested, there is little sign of any meaningful improvement. All the evidence points to the existence of a serious concentration risk which is bad for consumers and market stability.”
All-party parliamentary group on building societies and financial mutuals chair Jonathan Evans MP says: “Many Parliamentarians from all political parties recognise the importance of a diverse financial services sector for consumer choice and for the health and resilience of the economy as a whole. The Group welcomes the publication of the Diversity Index and we will continue to monitor Government policies and how they affect the health of mutuality in the UK.”
BSA director-general Adrian Coles says: “The 2010 Coalition pledge to ‘foster diversity in financial services’ is clearly still a work in progress and action by the Government is still needed. This is not only to promote and facilitate the arrival of new entrants, but to provide the right environment for the growth of existing challengers to the big plc banks such as building societies and other mutuals.
“Now is the time for the Government’s stated intent to be brought to life, as MPs consider the content of the Banking Reform Bill. Care will be needed to ensure that Government policies don’t unintentionally distort competition.”
The study was commissioned in order to monitor the progress of the coalition Government’s 2010 commitment to foster diversity in financial services. The Government’s pledge was ‘to foster diversity in financial services, promote mutuals and create a more competitive banking industry’.