Measures include the establishment of a Mutual Societies Development Unit headed by the FCA, which will act as a central hub to provide mutuals with expertise around policy and legislation. It will also support initiatives such as cooperative networks that help mutuals to collaborate, grow and build resilience.
The regulators have also announced they will reduce the time to apply for a new society from 15 to 10 working days to encourage more registrations. The FCA will also provide free pre-application support.
The PRA has also removed the Building Societies Sourcebook from its rulebook with immediate effect.
Both regulators will review mutual credit unit regulations to consider more risk-based capital requirements for larger, complex firms and proportionality for smaller credit unions.
Nikhil Rathi, chief executive of the FCA, said: “The mutuals sector is remarkably diverse and rooted in the communities and members it serves. They support people buy a home, insure against the worst events, increase financial inclusion and bring communities together, whether in the club, pub or on an allotment. We want to help them grow, and our new Development Unit will provide dedicated support. We’re also making it faster for mutuals to start up.”
Aldermore Insights with Jon Cooper: Edition 5 – Feeling enthusiastic about next year’s run-of-the-mill market
Sponsored by Aldermore
Sam Woods, CEO of the PRA and deputy governor at the Bank of England, said: “Mutuals are a vital part of our financial system. Today’s report examines how the financial mutuals sector is growing, and what we can do to help it thrive in the period ahead.”
Lucy Rigby, Economic Secretary to the Treasury, said: “We have committed to double the size of the mutuals sector, and are pleased the regulators are taking concrete steps to support the sector’s growth so it can deliver better value for members and communities.
“Mutuals form an important part of the UK’s financial and business landscape, supporting the savings, borrowing, pensions and more of millions of people.”
Recognising the role of building societies
The Building Societies Association (BSA) welcomed the regulators’ publication of the Mutual Landscape Report, saying it recognised that mutuals encouraged corporate diversity in the UK, which led to resilience in the financial system.
It also said the ‘Strong and Simple’ framework would address the issue of regulators adopting a one-size-fits-all approach, with rules created for larger organisations being applied to building societies without any adjustments.
The BSA also approved of the retirement of the Building Societies Sourcebook, which it said was “excessively restrictive” and “anti-competitive”. It said its removal would allow mutuals to compete on a level playing field with banks.
Ruth Doubleday, head of prudential regulation at the BSA, said: “The publication of the Mutuals Landscape Report and the retirement of the Building Societies Sourcebook mark the beginning of a new era of more proportionate regulation, whether relating to a firm’s size or business model type.
“Mutuals are vital for a competitive financial services market, offering better rates for savers and borrowers and providing a stable, long-term approach that benefits the wider economy. This report is a great reminder that when regulation recognises different business models, consumers, communities and the financial system all benefit.”
The Association of Financial Mutuals (AFM) also welcomed the measures, and said they recognised the value that mutuals added to the UK economy.
Andrew Whyte, chief executive of the AFM, said: “We welcome the PRA and FCA’s recognition of both the mutual sector’s vital role in the UK economy and its significant growth potential. It’s also good to see the regulators’ commitment to a tailored regulatory approach that enables mutuals to compete effectively alongside firms with traditional corporate structures.
“The introduction of the joint FCA and PRA Scale-up Unit is a positive step forward, which can help mutuals to make the most of opportunities to grow within an enabling regulatory framework.
“This report outlines practical measures the regulators plan to take to support the sector and is an important first step. Together with our members, AFM looks forward to continuing to work with both regulators to turn their good intentions into action, strengthening the sector and enhancing the UK’s financial resilience.”
