A mutual approach to business

Mutuality is in vogue. That was the view of David Webster, chief executive of the Hanley Economic Building Society, as he addressed the BSA annual conference in Manchester after being elected as chairman.

While the banking sector has been hit by mis-selling scandals and backlash over high pay and extortionate bonuses, building societies have thrived on putting the customer first, Mr Webster said.

“The performance of the sector since the credit crunch has presented many opportunities. We focus on local communities and that success is being translated into business levels.

“Mutuality is becoming a contemporary concept. It used to be seen as part of a sepia age, but now it is seen as the way forward.”

Unlike the banks, building societies had a good recession, according to Mike Ellis, chairman of Skipton Building Society. He said: “It has been tough for all institutions. Our sector has come out robust.”

He said the current challenge was to make the sector relevant and innovative for the next generation.

Innovation was the buzzword at the BSA conference.

Outgoing chairman Peter Griffiths, said building societies had regulatory challenges impending from the retail distribution review and the mortgage market review, as well as ongoing work on creating a new capital instrument.

He said the sector could innovate by filling the potential advice gap, particularly by supporting credit unions.

Mr Griffiths said he was shocked that the credit union movement had not taken off as much in the UK as in Ireland.

He also said societies need to use technology better, particularly for payment services, and make more use of existing assets such as mortgages for capital.

Mr Griffiths said: “Standard & Poor’s said in a report last month that building societies had survived the financial crisis in better health than the banking industry as a whole, perhaps this is why. Looking ahead, many in the sector have indicated that they intend to increase their lending activity this year and the sector is certainly open for business. Mutual lenders are primarily funded through low-risk retail deposits and with the general regulatory overload that is now prevalent, hard decisions are having to be made; is that £1 of retail savings better used on increasing liquidity, lending to a first-time buyer or on safer, less capital intensive lending to an established homeowner? What is certain is that it can only be used once. The views of the FSA, focused on regulation and prudence and the government, focused on homes and growth, are at odds here.”