A report published by Oxford University claims that, if financial services in this country were provided by more mutual institutions and fewer plcs, it would help to avoid future financial crises.
It argues that mutual organisations like building societies and credit unions, which are owned by and for their members, are better suited to supporting local economies than shareholder-owned banks, and therefore better for wider economic stability.
The author of the report, Professor Jonathan Michie, said: “The interests of individual consumers were sacrificed by managers of shareholder-owned companies focusing on shareholder value – now dubbed by one of its champions, Jack Welch, as ‘the dumbest idea in the world’.
“The credit crunch, which was caused by the activities of private sector banks, resulted in the UK government giving them a bail-out of perhaps £80bn.”
The report suggests that the Bank of England and the government should pay more attention to building societies when setting interest rates and regulating the market, and says a ministerial post should be created to oversee and encourage more mutuals.
Adrian Coles, director-general of the BSA, said: “We passionately believe a strong and vibrant mutual sector is good for society and for everybody’s financial wellbeing. We call upon the government and all those committed to a financial services sector that is both more stable and fairer to consumers to act upon the recommendations that are contained within this report.”
