Building Societies Snub Bank Body Merger Plan

The building society sector's key lobbying group has rejected proposals to draw it into the ambit of a new umbrella association for the banking industry in an indication of mutuals' desire to distance themselves from the reputational woes of their rivals.

Sky News has learnt that the Building Societies Association (BSA) wrote last week to Ed Richards, the former head of media regulator OFCOM, to oppose the idea that it could form part of a new representative body for banks.

The BSA, whose biggest members include the Nationwide and Yorkshire building societies, was named by Mr Richards in a preliminary report published earlier this year as a possible component in a future umbrella organisation.

But in a letter seen by Sky News, Paul Broadhead, the BSA's head of mortgage policy, said it was not an idea which had been welcomed by the body's members.

"Having been fully out of scope in the original consultation, we were interested to note the inclusion of the Building Societies Association (BSA) in the latest iteration of the report under two of the models presented.

"We have consulted fully, and in a range of forums, with the BSA membership and with the BSA Council (effectively our board)," Mr Broadhead wrote.

"This consultation resulted in unanimous agreement that the BSA should not form part of any new entity due to the distinct nature of the sector, something that you recognised may be the case in your report.

"The building society sector is truly distinct from the banking sector, this includes corporate structure, legislative status and in some areas it is subject to additional layers of regulatory guidance."

Mr Richards' review, which is likely to be completed later this year, has been driven by the biggest high street lenders, who believe there is significant scope to make financial savings and deliver more effective representation of key industry issues by reducing the number of trade associations.

The review could result in significant changes to bodies such as the British Bankers' Association (BBA), the Payments Council and the Council of Mortgage Lenders.

The BBA would be expected to play a leading role in any amalgamation of trade bodies, although it antagonised some of its largest members last week by playing down the prospect of any regulatory action on PPI mis-selling just hours before the City watchdog announced a series of important measures.

In an update published in July, Mr Richards said he was considering four separate models but that he was leaning towards two which focused on the retail and commercial banking membership bodies operating in the UK.