MPs will consider fresh legislation over the coming months
Nationwide Building Society customers may want to note some significant legal changes that may impact them. The building society boasts millions of members and operates over 600 branches.
Top officials from the Treasury recently addressed the Treasury Committee regarding new legislation to be presented to MPs later this year. This follows other recent discussion about major reforms aimed at opening up the banking sector. The leading officials appeared before the committee to discuss various elements of their work.
Gwyneth Nurse, director general of financial services at the Treasury, informed MPs that a “multi-year programme” is underway to introduce changes across the mutuals sector. The concept of a mutual is that the organisation is owned by members, rather than being owned by shareholders who receive profits.
Chancellor Rachel Reeves announced in her 2024 Mansion House speech a package of reforms to strengthen the mutuals and co-operative sector. This included bringing in certain legal changes to relax restrictions on building societies regarding how they finance their activities.
An amendment was made to the Building Societies Act 1986, to enable the funding limits on building societies to be relaxed, allowing them to raise funds through more means beyond members’ savings. The amendment allows for the Treasury to introduce further regulation “made by statutory instrument” to specify which types of funding can be exempted from the funding limits.
Ms Nurse indicated there will be more work on this shortly. She informed the committee: “In the same speech [Mansion House 2024], the Chancellor announced that we would make progress on the statutory instruments we need to change the funding limit for building societies.
“We have not made progress on that yet, but I can tell you that we will be laying those statutory instruments before the summer recess. We have some resource that has come in to help us do that.” Parliament is due to break for summer recess on July 16 this year.
Nationwide was also mentioned in a previous Treasury Committee meeting, regarding easing restrictions on bank service providers. Sarah Harrison, chief executive of the Building Societies Association, previously told the committee that the current capital requirements for lenders like Nationwide should be reformed.
She said: “At the moment, in the UK we have certain requirements in the prudential regulatory space, to require capital to be retained, often as a ratio of capital to assets, for good prudential reasons. Normally, the levels are set internationally but in the UK we’ve added a UK requirement, which is known as the leverage ratio buffer.”
The purpose of these restrictions is to ensure that lenders maintain adequate funds in reserve so they can sustain their operations if their investments or loan repayments fail. Ms Harrison said: “In practice, what that means is some of the obligation on some of our building society members is to hold a lot more capital than is necessarily reflective of their risk portfolio.”
She said that Nationwide had told her that without the buffer, the organisation could potentially release an additional £30billion in capital towards business or mortgage lending. Nationwide was asked for its viewpoint on whether these capital regulations should be eased.
A spokesperson said: “Reducing leverage buffers would support additional lending to both individuals, via mortgage lending, and SMEs, through business loans. With the Government’s ambition to double the size of the mutuals sector, leverage ratio reform would support the sector’s growth potential, where current leverage requirements can often constrain further lending activity for lower risk providers.”
