Friday, 27 March 2009

Good news for Co-operators

Via Politics for people comes an article indicating that the Chancellor is in favour of encouraging mutualisation:

Alistair Darling will next month signal strong support for mutual savings banks and building societies when he sets out a white paper on strengthening Britain’s financial system.

The chancellor has spoken warmly about the mutual model, embodied in institutions such as Nationwide, which tend to run a less risky business model, based on savings and lending. The Treasury is assessing potential legal or regulatory changes to help mutuals ahead of the white paper.


Although Mr Darling accepts that some mutuals can be run just as badly as banks such as Northern Rock, he believes they are less likely to use “extreme” funding models or to depend so heavily on wholesale money markets. Building societies have only 20 per cent of the mortgage market, down from 59 per cent before the wave of demutualisations sparked by the Building Societies Act of 1986.


a spokeswoman for the Building Societies Association said that the time was ripe for an expansion of the sector, given that its model tended to lead to cheaper borrowing rates. “Customers are fed up with the plc banking model, this is a good time for alternative models.”

This is excellent news, mutual lending groups are more ethical and more democratic than businesses working on other lending models. They are also less reckless when it comes to borrowing and lending. A characteristic that leaves them less vulnerable to the kind of market down turn that pushed the Northern Rock to the wall.

As anyone who has spent five minutes talking to the Club Secretary this year will know out of the few banks not to make a loss in the previous year only one high street bank increased its profit. The Co-operative Bank.

Nice one Alistair!

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