BSA Newsbite - October 2009

Friday, 30 October 2009 12:00 AM

Welcome to the October edition of our e-newsletter, BSA Newsbite. A monthly online update, Newsbite will give you the latest news, views and stats from the building society sector.

The Winter edition of the BSA's quarterly publication Society Matters will be available shortly. To request a postal copy or to be added to the distribution list email. It will also be available to download from the BSA website via this this link

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Remutualising the Rock does not mean the taxpayer loses out

Remutualising Northern Rock would be good for a number of reasons.

Diversity - a financial system with diverse ownership and governance structures is better able to weather the strains of the business cycle than one which is plc-dominated; risk appetite - mutuals generally tend to adopt a lower risk profile because their objective is safety and fair pricing for members, not profit extraction for shareholders; and competition - keeping a reformed Northern Rock independent of the big banks would be good for competition.

What it doesn't mean, however, is that the taxpayer would lose out. There's no question of the Rock being handed over to its savers and borrowers for nothing. A re-launched and remutualised Northern Rock can repay the taxpayer stake over time.

Some commentators have argued that remutualisation is flawed because taxpayers would not re-coup their investment. But they would - not immediately, rather over the longer term. Gradual repayment can give the optimum outcome, both returning full value to the taxpayer and achieving other public policy goals. Better than a rushed "fire sale".

All this is explained in more detail in Converting failed financial institutions into mutual organisations - a report published for the BSA by the Centre for Mutual and Employee-owned Business at the University of Oxford, which can be viewed on the BSA website via this link

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Second Mutuals Forum a success

The second annual Mutuals Forum brought together mutual organisations in the financial services sector including building societies, mutual insurers and cooperatives, with organisations from across the health, education and retail sectors - all owned by members and not shareholders.

Addressing the Forum on the value of mutuality, Ed Balls the Labour / Co-op MP for Normanton and Secretary of State for Children, Schools & Families, said:

"It is interesting to see the response of the mutual sector over the past couple of years: - building societies are now leading the sector in responsible lending. co-operatives are enjoying a period of sustained growth.

"The question now for the sector is what next?.. it's clear to me that the mutual sector is better organised and better placed to operate successfully than it has been for many years - and that it has a big role to play."

Presentations from the event can be viewed via this link

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Sensible balance needs to be reached on mortgage regulation

The FSA's much heralded mortgage market review was launched earlier this month.

While much of the detail in the paper is sensible, the BSA has significant reservations about the possible unintended consequences of some of the ideas expressed.

Commenting, Paul Broadhead, BSA Head of Mortgage Policy, said:

"It's important we have a sensible balance between appropriate regulation and allowing people to buy their own home when they can afford to do so.

"The vast majority of the British population aspire to home ownership and these proposals must not frustrate the sensible ambitions of potential homeowners.

Affordability

"We are pleased that the FSA is not setting maximum loan to income or loan to value ratios. We welcome the FSA's recognition that lenders need to focus on borrower's levels of disposable income.

"However, while we believe this is a sensible approach, we remain concerned about how the FSA will implement these requirements in practice.

"We believe that home ownership is something that should be encouraged, and it is vital that lenders retain the flexibility to respond to the very individual financial circumstances of individual borrowers.

To read the full article go to this link

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BSA Annual Lunch

12.30 for 1.00pm, 12 November 2009

Royal Garden Hotel, London W8

Meet senior building society executives, suppliers to the sector, and key contacts from regulators, government, trade associations, the media and other organisations at this popular networking event, sponsored by Legal & General.

Guest speaker:

Sarah McCarthy-Fry MP, Exchequer Secretary to Treasury

Single tickets: £75 + VAT for BSA members and associates / £125 + VAT for non-members.

Tables of ten: £750/£1,250 + VAT

For more information and to order your ticket please go to - this website

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