He will highlight the central role that mutual lenders hold in the provision of mortgage finance, and will warn of potentially choppy waters ahead in relation to changing capital requirements.
Mutuals are far from identikit and collectively add valuable diversity to the financial services sector, providing competition and choice to consumers and contributing to the stability of the financial system.
During 2012 and into 2013, mutual lenders have been at the core of the mortgage market, particularly as some big plc banks have been restructuring their balance sheets and lending less as a consequence. Over the first quarter of 2013, net lending by building societies and other mutuals totalled £1.9 billion. The figure for all other providers was minus £1.7 billion.
The focus of government on the housing market is welcome however a more holistic approach to the challenges of supply and demand, starting at the level of infrastructure planning could be more beneficial than individual schemes. It is to be hoped that as the details of the new Help to Buy Scheme are developed, government has a viable exit strategy. Fannie Mae in the US was introduced as a similar temporary measure during the Great Depression and 70 years later is a policy headache for the US administration.
Just a few weeks on from the death of Lady Thatcher it is hard not to consider the impact that some of the changes under her watch may have on the mutual sector in the future. Her administration loosened the corset which controlled bank lending growth and the subsequent growth in gearing - or leverage as it now called - is now seen as one of the precursors of the financial crisis.
One outcome from the ongoing clean-up post crisis will be the introduction of leverage ratios. These have been designed for big plc banks and intended as a back stop measure of capital adequacy which takes no account of risk weighted assets. For the mutual sector, which has lower risk assets, a stable retail funding base, but restricted access to capital it could pose a real risk. If the level set is high and the glide path to implementation is short, far from being a backstop measure it will become the main driver of capital management. Perversely it could make prime residential lending far more capital intensive and therefore less attractive and put the sector at a competitive disadvantage to the big plc banks.
In this context, the three per cent leverage ratio suggested by the Treasury is far more sensible and sensitive to the different structure of the mutual sector than the 4.06 per cent mooted by the Parliamentary Commission on Banking Standards. It is to be hoped that the implementation schedule will be equally sensitive.
In conclusion, David Webster will say:
"As more traditional players, in the heady days before the financial crash we often found ourselves labelled boring. Now our back-to-basics approach is in vogue and standing us in good stead both with consumers and financially. In terms of culture and behaviour we are closely aligned with the values now desired from 21st century businesses. Our history of just getting on with it with energy and enthusiasm bodes well, but the Government can certainly help the sector to continue to provide diversity and competition."
