The All-Party Parliamentary Group for Mutuals has challenged the way that government and financial regulators work with mutuals.
The Group has called for a series of reforms that will enable building societies, friendly societies and mutual insurers to compete on a fair basis with PLCs.
The report recommends that:
1. New capital instruments for mutuals should be created:
a. Individual mutual society members should be enabled to invest in their mutuals through new types of shares
b. Government and regulators should take action by supporting Lord Naseby’s Mutuals’ Redeemable and Deferred Shares Bill
c. The Financial Conduct Authority should abandon its existing definition of ‘sophisticated’and ‘unsophisticated’ investors which is simplistic and ill-conceived.
2. Regulators should have a legal duty to promote corporate diversity:
a. The law governing regulators should be changed to introduce this new responsibility
b. The UK regulatory and policy environment is less in tune with mutual business than in other EU countries
c. It is damaging to any understanding of corporate diversity and confusing to consumers if the Co-operative Bank maintains its name when it is no longer owned by a co-operative
3. There is a real need for policy makers, regulators and legislators to better understand how customer owned mutuals operate:
a. Regulators should better understand how mutuals are owned and operate, both here, and in competitor economies
b. Regulators should employ people with direct experience of mutual business
Chair of the APPG, Jonathan Evans MP, said:
“There is no doubt that the UK financial services system has become more concentrated through the experience of the global financial crisis. The consequence of that is there is less choice for consumers and less competition in the high street. The market is dominated by plc firms whose primary interest is serving their shareholders.
We were very fortunate during the course of this inquiry to secure testimony from some of the most important voices in the financial services sector. What we heard loud and clear was that without proper access to capital mutuals will never be able to truly compete with their PLC counterparts. That’s both bad for consumers and the wider economy.”
The Group, which comprises ninety-five Parliamentarians from both Houses of Parliament also heard from the Financial Conduct Authority and the Prudential Regulatory Authority.