UK regulator to discard the northern borders inspired by rock for construction societies

Be aware of free updates

Just subscribe to Financial regulation of the UK Myft Digest – delivered directly to the mailbox.

The Bank of England has announced the plans for improper support of the rules that limit the risk in the construction societies that it imposed after the collapse of the former mutual lenders of Northern Rock and Bradford & Bingley in the financial crisis.

The decision on the free construction society from additional restrictions on their lending and the Treasury shows that the regulators are convinced that the lenders belonging to the members are in a firm position, 17 years after they suffered from the worst disaster in their 250-year history.

This step is part of a broader set of measures announced As In recent months, to weaken the rules for the UK creditors in response to Prime Minister Sir Keira Starmer’s call, so that the regulators focus on supporting British competitiveness and economic growth.

Charlotte Herken, Boe Executive Officer for the UK deposits, said the proposal is trimmed by the so -called “Construction Society Source“It would have a significant impact on improving competition and growth in the UK.”

Herken said at a speech at the annual conference of the Birmingham Building Societies Association on Thursday, which, with their legal restrictions, their own lenders had a limited ability to accept external capital and high levels of mortgage loans.

But Herken added that the Central Bank believes that “risk management in this sector has improved to the extent to which detailed supervisory expectations fulfilled their goal.”

Ruth Drobledi, Head of the Prudence Regulation of the Association of Construction Societies, welcomed Boe’s proposal as “the main attraction we applaud”, adding: “Too long construction societies were seriously limited by restrictions on the fixed rate.

“It is rare and difficult for regulators to remove existing regulation, even if it is outdated, and in the case of the source of the book is poorly referred to, anti-component and has various unintentional consequences,” said Doubleday.

Additional rules of construction societies, including restrictions on how many mortgage loans they had imposed BOE in 2015 to eliminate the weaknesses revealed in 2007-08 in the sector.

The UK’s some largest construction societies were rescued by the British government after being hit by a housing market and evaporating investor and depositors’ faith. Northern Rock and Bradford & Bingley Demutualied on the eve of the financial crisis.

Last year, the UK construction societies in the UK had £ 525 billion, including £ 396 billion, is 29 percent of gross lending in the country, reports the construction societies.

Removal of limits “Allow to build societies to increase lending,” said Doubleday.

Herken said that in recent years the sector of the construction company recovered, emphasizing that, like rapid growth of mortgage lending and deposits, construction societies also supported “sound prudence indicators, with strong positions of capital and liquidity”.

She expressed confidence that the prudence regulation of the BOE body, which controls the lenders, “has the right regulatory and supervisory tools to assess the safety and validity of construction societies, as well as to act in the weak areas we determine.”

Continuing to set detailed rules only for construction companies that do not apply to other creditors, “will be a disproportionate approach,” she added.

BOE has announced a few recent measures to support smaller creditors such as exemption More than their restriction of how much they can borrow, and from the requirement to issue debt, which can be destroyed in the crisis. He also offered a simplified set of capital rules for smaller creditors.