Main photo: Emma Reynolds, economic secretary to the treasury, addresses the BSA
The Building Societies Association (BSA) held its annual conference in Birmingham earlier this month, including the Global Co-operative Banking Forum.
The BSA – which is marking the 250th anniversary of the first building society as well as the International Year of Cooperatives – has recently been strengthening its ties with the wider co-op and mutual movement and last year joined a partnership with the Co-operatives UK, the Association of Financial Mutuals and the Association of British Credit Unions to lobby the government for favourable policy.
Those ties were again emphasised at the conference, with the co-op forum opened by Nina Schindler, CEO of the European Association of Co-operative Banks (EACB), and Robin Fieth, outgoing CEO of the BSA, who both paid tribute to the resilience of the mutual model and the need for a diverse banking system.
A keynote followed from Emma Reynolds, economic secretary to the Treasury, who called for more action on financial inclusion – including moves to encourage good savings habits in the public, and to improve female representation in senior banking roles.
She thanked building societies and credit unions for joining Fair4All Finance on the Credit Subcommittee of the Financial Inclusion Committee, which is “considering how access to affordable and responsible credit can support household financial resilience” ahead of the publication of the government’s financial inclusion strategy later this year.
In a Q&A session with Tory peer Nicky Morgan, Reynolds said: “What we’re interested in achieving here is better financial resilience for people across the economy, and at the moment, we have a situation whereby only 8% of the population have access to financial advice, and the rest of the population don’t have that privilege.”
Labour’s pledge to double the co-op and mutual economy is a crucial part of that, she added. Asked by Morgan what the metric is for that “doubling”, Reynolds said, to some gentle laughter from the audience, “Well, that is the million dollar question”.
She thanked the sector for coming forward with ideas, adding: “We are open to working with collaboration as to how we actually measure that, but the commitment is clear. We want a doubling of the sector.”
She said the government included many Co-op Party members and valued the role played by mutuals; congratulating the sector for already achieving growth, she asked: “What are the challenges and barriers in your standing, in your way of further growth?”
Related: Building societies and first-time buyers
Asked if the government would “commit to including at least one mutual voice of all relevant committees and advisory groups”, Reynolds said there were no specific commitments but the voice of the sector, and bodies like the BSA, are valued.
Next, she was asked if regulators could be required to take action on maintaining corporate diversity, by abandoning structure neutrality and supporting the growth of mutual and co-operative sector. Reynolds said the priority is to ensure competitiveness, adding: “I’m not sure that the regulator should favour one part of the sector over the other. I’d have to see some very, very good evidence.”
In terms of driving growth, the key thrust of the afternoon was the need for regulatory reform – particularly in terms of proportionality. This has been a regular refrain from the mutual and credit union sectors around the world since strict regulations were introduced after the 2008 financial crash, which left smaller entities straining under costly red tape designed for ‘too big to fail’ corporate giants.
Debbie Crosby, CEO of the Nationwide Building Society, warned: “For small institutions, the regulatory burden is very, very high” and called for an update of the Building Societies Act. “Even with the changes that have been made, the act still looks increasingly outdated,” she said. “It’s a year since the primary legislation was passed, and we now need to look forward to the secondary legislation that brings it into force. I would really ask that the government does continue to keep building societies active in review and make sure that we keep pace with the Companies Act.”
But the onus is not just on government and regulators, she said: mutuals must also work to stay relevant to younger customers in a fast-changing market. “Mutuals offer a very interesting alternative to mainstream banking services,” she added. “Responding to this challenge isn’t simply about just copying new digital banks or the big banks. It is about finding a way to describe the unique benefits of our mutual model.”
With building societies leading the way on serving first-time buyers, that value is demonstrable, she added; innovations in the sector to underpin that include youth-savvy marketing using channels like Tik-Tok, and a strategy of acquisitions, including Nationwide’s takeover of Virgin Money, and Coventry’s purchase of the Co-op Bank, which she thinks offer strong opportunities to grow the sector.
A panel discussion followed, highlighting the values and principles of mutualism when it comes to marketing. David Murano, deputy CEO of Spain’s Caja Ingenieros, highlighted the sector’s resilience, pointing to the way Spanish mutuals weathered the 2008 storm.
And Steve Laidlaw, CEO of Australia’s People First Bank, said the ethical values of the sector, with the emphasis on ESG, also offered a marketing advantage.
Barbara Casu, professor of finance and deputy dean at Bayes Business School, City St George’s, University of London, warned that sector growth could be “a little bit problematic” as building scale could threaten the sector’s virtue of “being closer consumers, being closer to businesses, understanding the local communities and financing the local community”.
But Laidlaw, whose bank comes from a merger of third and fourth largest mutual banks in Australia, said this could be offset by the use of digital to communicate the sector’s values to tech-savvy young consumers. “We’re two thirds of the way through a 30 million investment into our technology platform, and we’re removing all our legacy infrastructure and moving to tier one providers so that we can ensure we’re contemporary, agile and meet the very demanding of the generation coming through.”
In terms of reaching this younger demographic, the term ‘building society’ itself might be a problem, as it is seen as old fashioned or meaningless. Crosby said Nationwide has shifted its marketing emphasis to the language of mutualism. Laidlaw agreed. “in Australia, customer-owned banks, building size, credit unions, mutual banks … No one knows what all these things mean. It’s just so confusing. And the legislation was changed a few years ago, which allowed all of those entities to rebrand as banks, which was what we did.”
Regulation was back on the agenda for the final panel session of the conference, with Marcus Barboza, chief risk officer of Brazil’s Sicredi, Harrie Numela, executive VP, retail banking at Finland’s OP Financial Group, and Vincent Maagdenberg, chief risk officer at Rabobank, all calling for proportional regulations – in terms of balance sheet and capital requirements – and better understanding of their business models by regulators.
Numela said burdensome regulation had spurred a rapid period of consolidation in Finland’s co-op banking sector. Seven years ago, OP consisted of 170 co-op banks, he said: 100 of those have now merged and he expects, by 2026, there to be only 30 or 40 left.
The regulatory threat to the sector risks harming communities, said Barboza, who pointed out that in Brazil, mutuals are resisting the trend in the wider banking sector to abandon branches in favour of online-only services. “We have 3,000 physical branches spread throughout Brazil and 200 about more than 200 cities in Brazil,” he said, arguing this is important to community engagement and financial inclusion.
Maagdenberg agreed that reducing the regulatory burden is important to ‘keeping the local presence intact”. He said his organisation has managed to keep that localism intact despite centralising by merging 106 banking licenses into one to help meet those regulatory demands.
