Regulators announce plans to support growth of mutuals sector

They include a review of credit union regulations and the launch of a Mutual Societies Development Unit by the FCA.

The proposals form part of a package of initiatives, published in a joint report from the PRA and FCA[2].

These include: 

• A new FCA Mutual Societies Development Unit[3] that will act as a central hub of expertise and insight helping mutuals navigate policy and legislative changes. It will support initiatives such as co-operative networks that enable mutuals to collaborate, grow and build resilience.
• A PRA and FCA review of mutual credit union regulations, considering more risk-based capital requirements for larger, complex firms and proportionality for smaller credit unions.
• Free pre-application support[4] by the FCA for firms setting up as a mutual society, innovating their business models, or seeking guidance applying for targeted support permission.
• A cut in application times for new societies – from 15 to 10 working days, encouraging more society registrations through the FCA’s Mutuals Society Portal.
• Confirmation from the PRA that the Building Societies Sourcebook has been removed from the PRA rulebook with immediate effect.

The FCA has also published its own report[5] as registering authority assessing the mutual societies sectors.

Nikhil Rathi, chief executive of the FCA, said:

'The mutuals sector is remarkably diverse and rooted in the communities and members it serves. They support people buy a home, insure against the worst events, increase financial inclusion and bring communities together, whether in the club, pub or on an allotment. We want to help them grow, and our new Development Unit will provide dedicated support. We’re also making it faster for mutuals to start-up.'

Sam Woods, CEO of the 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.' 

Economic Secretary to the Treasury Lucy Rigby said: 

'We have committed to double the size of the mutuals sector, and are pleased the regulators are taking concrete steps to support the sector’s growth so it can deliver better value for members and communities.

'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 announcements build on existing regulatory initiatives to support mutuals and the wider financial sector, including:

• The regulators' joint proposals to streamline the Senior Managers and Certification Regime to support competitiveness.
• The launch of the Scale-up Unit, providing tailored support to firms with growth ambitions.
• The PRA's Strong and Simple rules, which simplify capital requirements for smaller firms.
• The PRA’s introduction of Solvency UK, which significantly cuts red tape for insurance firms.
• The FCA’s mortgage market reforms, taken up by 85% of the market including building societies, has led to lenders being able to offer around £30,000 more. 

Mutuals are owned by their members, typically to serve their owners’ needs and financial mutuals have over 30 million members across the UK. This includes 93 mutual insurance firms, 42 building societies and 350 credit unions. 

There are also 12 million memberships across over 8,400 co-operative and community benefit societies. Collectively, these hold more than £223bn in assets and include housing associations, social clubs and retail societies.

The reports were launched at an FCA and PRA event on Friday 5 December in Rochdale, attended by Economic Secretary to the Treasury Lucy Rigby MP. 

Notes to editors

1. Read the joint PRA/FCA Mutuals Landscape report[2].
2. Read the FCA’s Mutuals Registering Authority Report[5].
3. Read the PRA’s Policy Statement on the Building Societies Sourcebook.[6]
4. Additional new initiatives announced for the mutuals sector today include:
   1. New straightforward guidance from the PRA on Part VIII transfers, which allow smaller mutual insurers to be consolidated into a larger firm.
   2. The PRA and FCA opening discussions with mutual building societies on how best to prepare for mergers and acquisitions, which are becoming increasingly popular in the sector.