Why did
BSAdecide to issue its manifesto for financial mutuals?
As the political parties are drafting their manifestos, we felt it was time to call on all of them to consider what supporting mutuals looks like in the 2015 election.
The reason we have financial mutuals, why they were founded, was for a fundamentally different purpose than the corporate banks.
In basic terms, their model is to return value to shareholders. The whole mutual sector was created for improving people's lives and today they have a different form of behaviour and motive in the way they look after their members.
How big is the mutuals sector?
We have about 19% of what you might call the natural share of the mortgage market, and we are writing nearly a third of the market.
From January to June 2014,building societies approved 187,400 mortgage loans, a 29% share of the 655,700 mortgage loans approved.
Because building societies weren't reliant on market funding, after the 2008 crash we could start lending again well before the corporate sector.
Our purpose is to lend on residential mortgages, and when others won't, we will, that is what we are there for.
The diversity in the building society sector is something our members seek out. They will lend to people who would not pass a 'vanilla test', for example self-build, first time buyers, someone with a slight loss on their credit history. Our members are better at managing risk, and we are increasing our share.
If you look at insurance, the mutuals were down to 5% of market share following the demutualisations of the 1980s and 1990s.
They are now substantially growing - LV stands out in terms of the car insurance market.
What is your assessment of the government's regulatory regime for financial services?
We need to recognise how close we were to meltdown in 2008. The focus has rightly been on major international plcs, in the too big to fail category, and the needed a new regulatory regime.
What we are looking for as we move forward is regulation that is much smarter in supporting diversity in financial services. We have got some really good outline proposals in the manifesto. They are in a position to say there is more competition due to challenger banks - all of whom happen to be corporates. We believe that real diversity is important for both consumer choice and the resilience of the market. We have to think beyond more corporate players with different business models.
The manifesto calls for "a rational approach by regulators". What does that mean in practice?
The Bank of England and the PRA are quite rightly concerned about when institutions get into trouble, but also single-minded that they must be able to raise capital almost instantly. Mutuals traditionally do that through retained profit, so they are slow or patient capital models.
We need to give a lot more thought about how does their objective marry up with the pure mutual model, rather than saying 'that's too bad, you have to raise capital and it has to come from institutional investors'.
We want to try to work with those challenges and to give diversity to the market.
The other aspect that affects everyone from credit unions to friendly societies to insurers and mutual banks is that the
start up requirements are so onerous that it has become impossible.
We have not had a new building society since 1980, a new financial mutual since since 1995.
There is a balance between good capitalisation and prudential security as well as the ability to innovate, to start up, to do whatever the people of this country want. If you want a new community bank, we should not have regulators saying no.
Are you confident the political parties are listening to your concerns?
We have a really good relationship with the three main parties. Building societies are all about helping people build and buy their own homes.
We have very strong support in all three parties so it is not about knocking on doors and not getting a hearing, and that support has encouraged us now to put this manifesto out and give them ideas.
Think about what patient capital means.
What is the legacy you want to leave? The beauty of the mutual model is that you can operate and plan for the long term, because they are not out to maximise short term gain, they are a much more sustainable model.