The Building Societies Association has welcomed the publication of the regulators’ Mutuals Landscape Report, saying the renewed focus on mutuals will help support the Government’s ambition to double the size of the sector.
The report from the Prudential Regulation Authority and the Financial Conduct Authority recognises the role mutuals play in promoting corporate diversity, strengthening resilience in the financial system and delivering long-term value for members.
The BSA said mutuals had long been constrained by a one-size-fits-all regulatory approach, with rules created for large, diversified banks applied to building societies despite their lower risk profiles.
It said measures such as the new Strong and Simple framework were beginning to correct this imbalance for smaller societies.
Alongside the report, the PRA confirmed that the Building Societies Sourcebook has been retired with immediate effect, a decision the BSA described as a significant and overdue shift that will allow societies to compete more effectively while continuing to focus on their core purpose of using members’ savings to support home ownership.
The association also welcomed regulators’ engagement with the Financial Reporting Council on the cost and limited availability of Public Interest Entity auditors, which it said was acting as a barrier to growth for building societies and credit unions.
It called on regulators to publish metrics monitoring business model diversity and to set out how this is factored into supervisory decisions and into the Bank of England’s assessment of UK financial stability. The BSA said the mutual model’s long-term approach to risk adds resilience to the wider financial system.
The report includes a commitment to undertake a comprehensive review of credit union regulation, which the BSA said must be accompanied by legislative reform such as changes to common bond requirements to support sector growth.
It added that mutuals already deliver tangible benefits to consumers by keeping interest rates competitive. According to BSA data, building society members received £4bn more last year in additional value than they would have received from banks.
Ruth Doubleday, head of prudential regulation at the BSA, said: “The publication of the Mutuals Landscape Report and the retirement of the Building Societies Sourcebook mark the beginning of a new era of more proportionate regulation, whether relating to a firm’s size or business model type.
“Mutuals are vital for a competitive financial services market, offering better rates for savers and borrowers and providing a stable, long-term approach that benefits the wider economy.
“This report is a great reminder that when regulation recognises different business models, consumers, communities and the financial system all benefit.”
