Building Society Mutuals’ Role in Local Economic & Community Development Foreword by Rt Hon Dr Vince Cable MP
Total Page：16
File Type：pdf, Size：1020Kb
Building Society Mutuals’ role in local economic & community development Foreword by Rt Hon Dr Vince Cable MP Building societies and other mutuals are an integral part of the UK’s financial services sector. They are rated far higher than banks by those who experience them on a daily basis, with 79% recommending their mutual provider against 60% of bank customers. They don’t have the cost of making dividend payouts but can allocate any surplus to depositors or borrowers. This report shows how the mutual-ownership model also allows them a greater focus on serving the needs of the communities in which they operate. From working to deliver regeneration projects, This has led to an understandable focus on how to providing disadvantaged young people with people can be helped onto the housing ladder in opportunities to broaden their educational a sustainable way. Building societies have historically experience, mutuals have a long commitment played a big role in financing home ownership to their members and to developing their and represent longstanding, responsible means of economies and communities. financing home ownership. The existence of 1,000 building societies in the 1930s created a “virtuous This kind of long-term and responsible approach circle” of mortgage lending supporting more house is what we need if we are to rebuild trust in building. The volatility of mortgage availability in financial services. more recent times has been down in no small part The Government made a clear commitment to to the de-mutualisation of building societies, such an approach in the Coalition Agreement of one of the great acts of economic vandalism in May 2010, with an aim to develop policies which modern times. would “foster diversity, promote mutuals and There is a strong case for a more varied banking create a more competitive banking industry.” sector and those mutuals which resisted the lure Using the Banking Reform Bill, we have made of conversion to plc banks continue to provide a some improvements to modernise the ways in different business model, based on the needs of which societies can communicate their corporate members and the areas where they live, without the information and to make it easier for them to operate pressures to produce shareholder returns. They have in today’s financial markets. However, we will know a noble record of helping people get ahead, and are we have succeeded when we see, not just existing surely a key part of the future. mutuals flourishing, but new ones starting up. There is a major issue of housing affordability in an Rt Hon Dr Vince Cable MP environment where house prices are too high and Secretary of State for Business, Innovation and Skills rising too fast in significant parts of the country. Building Societies Association 1 Building Society Introduction All politics is local – the impact of mutuals in their communities The Building Societies Association represents a diverse group of financial services The long-serving US House of Representatives Speaker, Tip O’Neill, coined the famous providers; some are household names delivering services across the UK, some operate phrase “All politics is local” to encapsulate his belief that it was much easier to get only in certain areas and are more familiar to the people who live there, while others people to understand political and economic arguments by reference to local issues. operate nationally out of a single office location. What unites these institutions stems Members of the public are more likely to respond to issues that affect them on a from the fact that they are not shareholder-owned, rather they are either wholly or day-to-day and local basis, than those which seem abstract and longer-term. majority-owned by the people that actually save or borrow with them, their customers, sometimes called members. Leading figures from across the political spectrum stretched beyond their founding base or acquired have underlined the importance of localism. This mutuals in other areas, many still identify with a has been particularly marked in the context of the particular locality whilst taking account of the Member-owned mutuals have motivations other they operate. Whilst the mutual model is banking reform debate and in terms of the key role needs of the new communities they serve. The than short-term shareholder return driving their characterised by longer-term relationship that should be played by financial institutions if Cambridge Building Society explained that “the business model. Mutuals do seek to make a profit building with customers, many mutuals also see they are to be more responsive to the needs of the society’s strategic direction is steered by gaining from their activities, but the way in which these longer-term relationships with the towns, cities, communities they serve. a greater insight of our customers’ need and profits are made and distributed differs markedly counties and regions in which they operate as requirements. This insight flows from being from the plc model. being equally important. The former Financial Services Secretary, Greg Clark integrated in their locality.” MP, committed the Government to making it easier Independent research has shown that customers of This report shows how mutuals are engaged with to set up new banks, promising that regulatory The Leeds Building Society is fiercely proud of its mutuals feel that their provider delivers consistently the communities in which they operate; how they burdens “should be lower for a bank that’s smaller.” origins and has committed to remain headquartered higher standards in terms of customer service, offers support local charitable activities, contribute to Fellow Conservative MP, Guy Opperman, hosted an in the city in which it was founded, regardless of better value for money and are more trustworthy. the life of the nation’s high streets and play an event in the north east of England in June 2013, future mergers or acquisitions. It calls its approach Overall, customers would be more likely to important role in developing regional and sub- attended by representatives of the financial services “Local Feel, National Presence”, as the society recommend them to friends and family than regional economies. As well as providing some industry to look at how more responsive banking encourages its branches around the country to work would customers of banks. illustrative case studies, this report will also put institutions could provide increased local decision to be part of the community wherever they are more numeric values on the impact of mutuals It is not just the way they serve their customers that making about lending money to consumers and located. Moreover, when it merged with the North as employers and how they contribute to civic, marks mutuals out as being different to shareholder- businesses. Mr Opperman optimistically stated that Tyneside-based Mercantile Building Society in 2006, community and business life across the UK. owned financial services companies, it is also the “I am looking forward to seeing, in the not too there was no longer any requirement for an Annual impact that they have on the communities in which distant future, local banks in our local towns.” General Meeting to be held in the north east. However, the Leeds Building Society decided that The Leader of the Opposition, Ed Milliband MP, has it would still hold an annual Member Forum in Difference in mutual customer scores compared to similarly signalled his support for a different system bankDifference customer in scores mutual for customer various service scores measures compared to Wallsend, North Tyneside, as a commitment to (percentage points) of local banking, modelled on Germany’s Sparkassen bank customer scores for various service measures engaging with its new members in the region. (percentage points) (locally-based savings banks), with an institution in +30 +31 each region with a remit to promote investment only As well as being a major provider of financial +25 in that region. He said that “we don’t need just a services to other co-operatives, the Co-operative +24 single investment bank serving the country. We Bank has made a pledge to improve social inclusion, need a regional banking system, serving each and serving as many communities as possible, every region of the country.” irrespective of background or situation, whether through their physical presence or via bespoke Calculated as difference in the % agreeing Many of the UK’s mutuals, including its 45 building products to meet individual community needs. to some extent minus the % disagreeing societies, have their roots in local communities, to some extent. BSA calculations using One of the results of this pledge was that finance often having been founded to address the housing data from YouGov PLC. Total sample size provided to small businesses in deprived areas and longer-term savings needs of local people. was 4,781 GB adults – percentages based (as a proportion of equivalent bank activity) was My provider is an I would My provider offers I can trust my on a summary of responses of providers Whilst many institutions may have outgrown important part of recommend my good value for provider to act in once again above the industry average in 2012. within the relevant sectors. Fieldwork was operating in a single town, city or region, others the community (or provider to friends money my best interests undertaken between 16th - 22nd August communities) in or family 2013. The survey was carried out online. continue to offer services defined by geographic which it operates The figures have been weighted and are boundaries. Of those institutions that have representative of all GB adults (aged 18+). 2 Building Societies Association Building Societies Association 3 Building Society Building Society Branches The Newbury Building Society has opened two new branches in the past two years in towns about which The commitment that mutuals show towards their they have an in-depth knowledge.