Nationwide customers may want to note an upcoming legal change (Image: Getty)
Nationwide Building Society customers may want to note some key legal changes affecting them. The building society has millions of members and more than 600 branches.
Senior Treasury officials recently spoke to the Treasury Committee about new laws to be presented before MPs later this year, and there has also been discussion of other reforms to open up the banking sector. The top officials appeared before the committee to speak about various aspects of their work.
Gwyneth Nurse, director general of financial services at the Treasury, told the MPs that there is a “multi-year programme” under way to bring in changes across the mutuals sector. The idea of a mutual is that the organisation is owned by members, rather than being owed by shareholders and delivering profits for them.
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Chancellor Rachel Reeves announced in her 2024 Mansion House speech a package of reforms to boost the mutuals and co-operative sector. This included making some legal changes to ease restrictions on building societies around how they fund their activities.
An amendment was made to the Building Societies Act 1986, to pave the way so the funding limits on building societies could be eased, so they could raise funds by means other than members’ savings.
The amendment provides for the Treasury to bring in further regulation “made by statutory instrument” to specify what type of funding can be exempt from the funding limits. Ms Nurse said there will be more work on this soon.
She told 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 set to rise for summer recess on July 16 this year.
Nationwide also had a mention in a previous meeting of the Treasury Committee, in the context of opening up the 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 explained: “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 idea of these constraints is to guarantee that lenders keep sufficient funds in reserve so they can maintain their operations if their investments or loan repayments fail. Ms Harrison warned: “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 informed her that without the buffer, the group could potentially free up an extra £30billion in capital to go towards business or mortgage lending.
Nationwide was asked for its view on whether these capital rules should be relaxed. 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.”
