East Anglia: Ipswich Building Society boss Paul Winter backs IBC bank reforms
THE boss of the Ipswich Building Society yesterday welcomed proposals for reform of the banking sector which he said would help put mutuals on “a level playingfield”.
But Paul Winter, the society’s chief executive, said the Government still had work to do to fulfil its coalition plege to ensure diversity in the financial services sector.
Mr Winter said the key proposal of the Independent Commission on Banking (ICB) to “ringfence” retail banking, such as current and savings accounts, from higher-risk investment banking activities, was welcome.
“We cannot allow again the situation where the whole of the banking industry was on the verge of collapse due to decisions made outside the normal retail environment,” he said.
“In many ways, the ringfenced banks will be similar to what building societies have always been and will continue to be, based mainly on the savings of ordinary people.”
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In addition to the cost to taxpayers of bailing out the banks, building society customers had been forced to shoulder the cost a second time, in the form of the payments which the mutuals were required to make to the Financial Services Compensation Scheme, said Mr Winter.
“Building societies have already been paying disproportionately for the previous failures of high street banks which were brought about by their non-retail activity, so we welcome measures which could assert more control on this, he said.
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“In the long terms, building societies should be able to compete with the banks on a more level playing field. That has to be a good thing, and we hope the banks will have to play by the same rules.”
However, Mr Winter said the Government had yet do deliver on its coalition agreement to ensure greater diversity in financial services and this had been outside the remit of the ICB, headed by former Office of Fair Trading chief Sir John Vickers.
For example, there was no mechanism for the branches which Lloyds was being required by the European Commission to sell to acquired by a mutual.
Similarly, there was no mechanism for Northern Rock, a former building society which converted to bank status, to be remutualised when it was returned to the private sector.
Mr Winter said, however, that the timescale allowed by the ICB for its reforms to take effect, which does not envisage the changes being fully in place until 2019, was reasonable in view of the difficulties faced by the economy and the potential effect of the measure proposed on lending levels.
“Care needs to be taken with the speed of implementation on any measures, so that their impact doesn’t affect the fragile economic recovery,” he added.