Speaking at the BSA conference in Manchester, out-going BSA Chairman, Peter Griffiths also said consumers will face increasing challenges as the fall-out from the financial crisis and economic pressures continue.
However, a Standard & Poor’s report out last month suggested building societies survived the financial crisis in better health than the banking industry as a whole.
Griffiths said mutual lenders are primarily funded through low-risk retail deposits but with the general regulatory overload that is now prevalent the mutual sector is having to make hard decisions.
“The views of the FSA, focused on regulation and prudence and the Government, focused on homes and growth, are at odds here,” he concluded.
These factors, combined with one-size-fits-all regulation will prompt changes in product supply and an increase in the application hurdles facing consumers, said Griffiths.
Griffiths said the unintended consequences of new regulation which could see thousands of consumers facing financial exclusion.
The “laudable twin intentions” of the RDR to increase professionalism and move to a fee-based system for financial advicecould exclude many from financial advice if they don’t want to pay a fee.
This will put pressure on the few free advice services in the UK, or see consumers who need advice going without.
He also cites the Mortgage Market Review (MMR) as another example where unintended consequences may adversely impact the UK public.
He warned that once the MMR is implemented the mortgage application process will change with both lenders and consumers having to get used to far more detailed, and some may believe intrusive questioning. The process is also likely to take substantially longer – a generally higher hurdle for home ownership.
“The intended results of these two pieces of regulation are laudable. No one could argue in favour of practices such as coupling abundant money supply with lax credit policy, policies that were prevalent in certain sectors of the mortgage market,” he said.
“Unfortunately, the unintended consequences of new regulation could see swathes of the UK population far less able to access financial advice and finding it much harder to get a mortgage,” he added.
The hoops lenders will have to get consumers to jump through are getting so high they might prompt a consumer backlash, he said.
David Webster, chief executive of the Hanley Economic Building Society, has been elected chairman of the Building Societies Association replacing Peter Griffiths.
