Building Societies Association discuss new EU banking legislation

The Building Societies Association, jointly with MEP Kay Swinburne, brought together representatives of the UK mutual and co-op sectors to discuss new European banking regulations.

The Building Societies Association brought together representatives of the UK mutual and co-op sectors to discuss new European banking regulations.

In reference to the current financial crisis, Kay Swinburne MEP said: “It is critically important that at times of economic hardship following the financial crisis, we are looking to support as many of our financial institutions as possible, in part those who are using the mutual society and the broader co-operative movement.”

Dr Swinburne added it is essential for the co-op sector to have a word to say when new regulations are drafted, making sure that “when we have legislation in Brussels it is accommodated to their needs”. She highlighted that co-operative banks and mutuals are different from commercial banks and they face difficulties in raising capital in the same way shareholders’ banks do.

“The co-op movement and mutuals are there for the benefit of their members. They are real community assets. It is important for them to reach their full potential. In Wales they are part of the community,” said Dr Swinburne.

The MEP added mutuals make sure they have ethical policies in terms of their investments and the way in which they behave.

She continued: “The diversity that mutuals and co-ops offer across the world is to be encouraged and we should ensure legislation supports them”.

A deep concern for co-operative banks and mutuals has been the capital requirement set up in Basel III agreement. Dr Swinburne explained that the capital requirements are very much tailored to the global financial players. She added co-operative banks and mutuals play a key role in financing SMEs and micro entities, helping people to overcome the current financial crisis.

Present at the pre-conference event, Paul Flowers, the Chair of the Co-operative Banking Group, also said that legislation should taken into account co-operative banks.

“I see legislation as being part of a process there is always the need for refreshing the legislation,” said the Mr Flowers. He highlighted the fact that co-operative banks are unable to raise capital on a level playing field with other banks. In the UK the present government is moving a consolidation act to bring together all pieces of legislation and have some new pieces of legislation to help co-ops grow even in hard times.

Mr Flowers said co-operative banks across Europe have coped better with the financial crisis. Paul Flowers explained: “Basically we didn’t lend what we didn’t have in. We had a liquidity ratio of well over 100 per cent. When Northern Rock went down their liquidity rate was 28%. They were four times over subscribed.”

Mr Flowers also said that the crisis has proven to be an opportunity, as well as a challenge for co-operative banks, because they have gained new customers. He continued: “We have endeavoured to maintain a position continuing to lend to SMEs and continuing to grow because a lot of customers brought their accounts to us largely because they trust us. This is true across the whole Europe.”

General Director of the Building Societies Association, Adrian Coles, said the reception aimed to celebrate the success of mutuals throughout Europe during the financial crisis: “We have had a freezing in wholesale banking market and co-ops and mutuals have answered that through their reliance on retail deposit.”

Mr Coles added that in terms of assets, co-op banks and mutuals have taken much more sensible decisions on whom they lend to, how much they lend and on what terms, making far less losses than PLC banks.

Looking back at how co-op banks and mutuals have faced the crisis, Adrian Coles said PLC banks could learn from the mutual and co-op sector. The General Director of the BSA said that in those few instances when they have faced difficulties, they have been able to rely on assistance from the rest of their co-op and mutual banking sectors, when other banks have taken tax payers’ money. This has been a huge burden on governments.

Mr Coles added it is essential to determine the extent to which legislation is fit for purpose. He continued by saying evidence shows mutuals can still support lending to SMEs and support the local economy.

He gave the example of the UK Building Society mortgage lending, which has raised by 35 per cent over the first 10 months of this year, supporting the British housing marker. Adrian Coles said he welcomes the initiatives of the EU, adding that European legislation could enable mutual to separate their capital, and that it is very reassuring to know European legislation will be putting in place deposit guarantee schemes.

“Mutuals and co-ops were not immune to the crisis, but they were certainly not the cause, and they can be part of the solution,” said David Cutter, Deputy Chairman of the BSA.

Guest speaker at the reception, Dame Pauline Green said in a short speech that co-operatives and mutuals are together an important part of the global economy.

"The moment is here for us to take," said the ICA President.

She continued : "I am delighted to see that the BSA is engaging itself in Europe. I would ask you to engage more. Together we can make this a watershed year".

The BSA reception preceded the 5th Convention of the European Co-operative Banks, taking place in Brussels on 6 of November.


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