U.K. Treasury Minister Mark Hoban said he wants to loosen funding rules for mutual lenders as he seeks to provide an alternative to traditional banks.
The Treasury proposed amending the Building Societies Act to “widen opportunities” for those lenders. They will be asked to erect firewalls around their retail operations and bring loss-absorbency rules in line with those of traditional banks while their lending and funding requirements will be relaxed.
“The government has committed to increasing choice and diversity in financial services,” Hoban said in a statement released by his office in London today. “Building societies can play a vital role in this. The proposals we are setting out today provide a real opportunity for societies to expand their services and attract a new generation of consumers.”
The plans are part of a wider program outlined by former Bank of England Chief Economist John Vickers that aims to make Britain’s banking sector less reliant on public money during times of financial stress. Hoban said he wants a “more level playing field” with mutuals so that they can provide a greater challenge to banks.
The Treasury said in a consultation document that it’s open to reconsidering rules that specify that at least 50 percent of a mutual’s funding has to be in the form of retail deposits, a definition that doesn’t include deposits from small and medium- sized businesses, and that at least 75 percent of lending has to be secured on homes.
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