CML urges Treasury to grasp opportunity to improve building society prospects

The Council of Mortgage Lenders has responded to the Treasury discussion paper "Building society capital and related issues", urging the government to consider capital issues alongside regulatory and funding issues, to allow building societies to play their full role in the restoration of a healthy and competitive mortgage market.

Issued before the coalition government came to power, the consultation acts as a helpful focus for considering the actions that the authorities could take to put their stated support for the mutual sector into practice - a response that would be welcomed not just by building societies but also by other lenders who also value a diverse market.

CML director general Michael Coogan comments:

“Historically, societies have been well capitalised, risk averse and successful competitors to other deposit takers and mortgage lenders as a sector in both the savings and mortgage markets. However, since the funding crisis and credit crunch, and following the failure of a number of firms including a building society, the sector has suffered in the more stressed business environment. The sector’s competiveness has been significantly undermined by a range of factors, in particular the 300-year low in interest rates.

"We agree with the Treasury’s analysis that building societies as a sector face a number of significant challenges. We believe more needs to be done to ensure the long term contribution of a thriving mutual sector to future competitiveness and growth in the UK retail markets. Reform is needed to ensure the future resilience of the building society model, and we hope the new government will take a wider view on the actions that could help, including taking another look at the regulatory burden on societies and examining funding issues, and not focus exclusively on capital issues.”