Nationwide Building Society has spoken about key changes to UK law (Image: Getty)
Nationwide Building Society has spoken about some key changes to UK law affecting its services. The popular savings provider has millions of members and more than 600 branches.
The update comes after top Treasury officials recently spoke about changes to banking regulations that will soon be presented before MPs. Gwyneth Nurse, director general of financial services at the Treasury, gave an update about the “multi-year programme” that is under way to open up the mutuals and building society sector. A mutual is an organisation which is owned by members, rather than being owed by shareholders and paying out profits to them.
Ms Nurse spoke about legal changes they are working on after Chancellor Rachel Reeves announced in her 2024 Mansion House speech a package of reforms to improve the mutuals and co-operative sector. This included making some changes to UK law to ease restrictions on building societies around how they fund their regular activities.
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An amendment was made to the Building Societies Act 1986, in 2024, to allow that funding limits on building societies could be eased. The change to the existing laws allows the Treasury to set out further regulation “made by statutory instrument”, to specify what type of funding can be exempt from the funding limits. Ms Nurse said her team is working on this at the moment.
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.” This means this legislation will be put before Parliament fairly soon, as the summer recess begins on July 16 this year.
Nationwide was asked what these legal changes to its funding limits would mean for customers. A spokesperson said: “The Building Societies Act 1986 (Amendment) Act 2024 could unlock billions of pounds of additional lending capacity for mortgages, supporting families and first-time buyers, as well as boosting economic growth.”
There have recently been other calls to ease the restrictions on building socieites. Sarah Harrison, chief executive of the Building Societies Association, also recently spoke to the Treasury Committee that the current capital requirements for lenders such as Nationwide should be reformed.
She told the MPs: “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 limits is to ensure 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. Asked for a comment on this, Nationwide 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.”
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