Name: Martin Reynoldds
Company: PMS
It is always difficult to be objective about a subject that has a past, present and future effect when we can use hindsight.
I think it is now common knowledge that if the Government had not intervened,
the banking system would have collapsed and it would not have mattered whether
the lender was a bank or building society.
Looking at the present, it is true that a number of the banks that have been recipients of Government help do indeed have some very attractive products, especially savings and bonds.
There is a dilemma for the Government, and also the banks, who are being asked to
stimulate lending to both individuals and small firms, and offer attractive savings
rates in a historically low interest rate environment, while also paying back the
investment as quickly as possible. Is this economically possible while also ensuring
that they do not put their long-term future at risk again?
Predicting the future is always hard, but it may be that the mutual sector does
have to change parts of its business model.
This may be especially true for the smaller societies to prosper in the new world. It should also be recognised that the government-sponsored banks do have a cast iron guarantee on funds protection, but these players have always been top of the best buy tables anyway.
There is no easy solution, but whether the answers come from Whitehall or Brussels, I am confident that they will be purely political, rather than economic decisions.
Name: Nigel Payne
Company: Assurant Intermediary
The battleground between the banks, building societies, national savings and credit unions is not in the lending arena. Banks, building societies and credit unions need savers in order to fund lending, and each of them needs it to a greater or lesser extent than the other.
The one institution that does not need to fund private sector lending is National Savings & Investments (NS&I). It is purely there to help fund government borrowing, and is arguably the main institution to have benefited as a result of the credit crunch.
NS&I is viewed by the public as a gold-plated safe way to invest, and with its monopolistic position on premium bonds, it has seen billions of pounds diverted from banks and building societies into its coffers. At a time when the interest rate offered on many savings accounts is less than 1%, what is a saver supposed to do?
Earn a paltry 0.5% with the risk of some loss of the investment or invest in safe premium bonds with the chance of winning the £1m top prize? So does the BSA have a case that the Government is distorting fair competition? As far as the NS&I goes, I believe it does.
Building societies did see some benefit from the initial Northern Rock debacle, but they have since seen outflows – but this is not down to the government-owned banks, rather it is a result of savers withdrawing their deposits to pay off debts as there is no incentive to save with
interest rates of 0.5%. That is a no-brainer in a recession.
Name: Bernard Clarke
Company: Council of Mortgage Lenders
We recognise the challenges faced by building societies in particular – and by all lenders generally – in what are still very difficult market conditions. Building societies, smaller firms and specialist lenders face specific challenges, while businesses across the whole sector try to resolve a series of often conflicting objectives and demands.
Our central goal remains the restoration of a healthy mortgage market, in which all lenders can compete on a level playing field. Next year, as our work on the Mortgage Market Review intensifies, we will press for an outcome that benefits both lenders and consumers.
We have already said that separate proposals at this stage for a specialist sourcebook for building societies are inappropriate. We will continue to argue that, in pressing ahead with those plans, the FSA could have an adverse competitive effect on building society lending and the shape of the mutual sector.
An adequate supply of funding is crucial to the sort of healthy, competitive
mortgage market we need. If wholesale market conditions can continue to improve,
greater stability in savings markets should follow. We will therefore be looking hard at
the recent announcement in the Pre-Budget Report of measures to improve funding. Our
goal is to ensure that all members benefit from them.
We will continue to use our unique across-the-market perspective to present
a robust case for an industry in which all lenders – whatever their size, business
model and current level of activity – can successfully compete.
