CML news & views

The government should do more to allow building societies to play a full role in restoring a healthy and competitive mortgage market, our response to the Treasury has said.

Responding to the Treasury discussion paper “Building society capital and related issues” earlier this month, we urged the government to take a broader view, looking at capital alongside regulatory and funding issues.

Over their long history, building societies have been well capitalised, risk-averse and successful competitors with other deposit-takers and lenders in both savings and mortgage markets. But since the funding crisis and the credit crunch, and following the failure of a number of firms including a building society, the sector has suffered in a much more difficult business environment. Competitiveness has been undermined in particular by a 300-year low in interest rates.

We therefore agree with the Treasury’s analysis that the building society sector faces a number of significant challenges. As a result, more needs to be done to ensure that a thriving mutual sector continues to make a significant contribution to the competitiveness and growth of UK retail markets. 

The Treasury paper was issued before the coalition government came to power, but serves as a useful focus for the authorities to consider what to do to put into practice their stated support for the mutual sector.

Reform would help ensure the future resilience of the building society model. We urge the government to take a wider view of action that would help, including taking another look at the regulatory burden on building societies and funding issues. That would be more useful than focusing exclusively on capital issues.