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Tuesday 24th of August 2010

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March 29, 2010

New FSA guidance for building societies

by Gill Montia

Story link: New FSA guidance for building societies

The Financial Services Authority (FSA) has published additional guidance for building societies which will come into effect on 1st April 2010.

The regulator says it wants to ensure that where societies diversify from traditional business models, they have the risk management systems and skills necessary to operate safely.

The move follows a series of mergers in the sector and concerns that some societies were less than prudent in their lending during the years of the credit boom.

The new rules mean that the mutuals must re-examine areas of liquidity, wholesale funding and lending to ensure that they are aligned.

According to the FSA, societies that demonstrate appropriate risk management and skills will have complete flexibility to run their own business within the limits of the Building Societies Act.

However, those that cannot, will need either to improve risk management or move to a simpler business model.

The regulator explains: “Today’s changes will not limit a society’s freedom to diversify but sets out clearly the skills, systems and controls a building society needs in order to manage more complex business models.”

Building societies have until 30th September to identify any possible mismatches between their risk management and their business model and agree with the FSA what actions, if any, are needed.

 

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