British building societies are in line for a deregulation boost after UK watchdogs announced a joint raft of initiatives aiming to power up the sector.
Mutuals – which, contrary to banks, are owned by their members – are set to land a significant growth tailwind following a fresh report from the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).
Under new proposals, regulators will remove the Building Societies Sourcebook from the PRA rulebook with “immediate effect,” ending a highly contested set of limits on mutuals.
Ruth Doubleday, head of prudential risk at the Building Societies Association (BSA), previously slammed the source book as “badly calibrated, anti-competitive” and containing “various unintended consequences”.
A central critique of the sourcebook concerned the limits on building societies’ lending and Treasury activities, which banks and challengers were not subject to.
The sourcebook contained limits on the volume of certain lending types, particularly on fixed-rate mortgages.
New building societies approvals accelerated
The watchdogs added it would cut the application time for new societies from 15 to ten days while also forming a new ‘Mutual Societies Development Unit’ to serve as a “central hub” for firms.
Sam Woods, chief executive of the Prudential Regulation Authority (PRA) and deputy governor at the Bank of England, said: “Mutuals are a vital part of our financial system.
“Today’s report examines how the financial mutuals sector is growing, and what we can do to help it thrive in the period ahead.”
City minister Lucy Rigby praised the reforms as driving the Treasury’s mission to “double the size of the mutuals sector”.
“Mutuals form an important part of the UK’s financial and business landscape, supporting the savings, borrowing, pensions and more of millions of people.”
The UK’s top building societies were hit by the changes to the cash ISA announced in the Autumn Budget.
Mutuals argued that they use cash ISAs to fund mortgages, and reducing these inflows would potentially make home loans more expensive.
Chancellor Rachel Reeves confirmed the ceiling for cash ISAs will be slashed to £12,000 from £20,000 from April 2027.
The move sparked fury with building societies, which described the decision as a “sucker punch for savers” and “deeply disappointing to lenders”.
Harriet Guevara, chief savings officer at Nottingham Building Society, said: “At a time when financial confidence is already fragile, cutting the allowance sends a difficult message to households who are trying to do the right thing.”