"We are pleased to note the Government's commitment to maintain a healthy and vibrant mutual sector. In particular, we welcome the moves to further enhance the capital raising instruments available to building societies and look forward to working with the regulators to develop these. As an organisation that prides itself on the quality of its corporate governance, we look forward to the Walker Review and would encourage the FSA to recognise the distinctly different business models of banks and building societies.
"However, we are disappointed with the timescales outlined for reform of the Financial Services Compensation Scheme (FSCS). The current system is inequitable as the FSCS charge is not linked to the level of risk posed to the financial system by individual institutions, be they a bank or a building society, but is instead allocated by share of the retail savings market. As a result, the levies that paid for the failure of others cost Nationwide £241 million. Whilst this is not exclusively an issue for building societies, as all low risk organisations are affected, the extent of the problem is highlighted by figures for 2009/10 which show the building society sector will pay around 7% of 2007/08 pre tax profits into the scheme, compared to below 2.5% for the banking sector over a similar accounting period."
"There will also be consultation about pre-funding of the FSCS. The Government believes it should be pre-funded, which would allow the industry to contribute before a major failure, should one occur. Nationwide believes that any move to a pre-funded scheme should be accompanied by a risk based levy.
"The events of the past 18 months could never have been predicted and the timing is right to reform the industry to help increase consumer and stakeholder confidence. We will work with the industry and the Regulator to bring the relevant proposals to fruition."
