Introduction

The Building Societies Association (BSA) represents mutual lenders and deposit takers in the UK including all 45 UK building societies. Mutual lenders and deposit takers have total assets of nearly £380 billion and, together with their subsidiaries, hold residential mortgages of nearly £260 billion, 20% of the total outstanding in the UK. They hold over £260 billion of retail deposits, accounting for 21% of all such deposits in the UK. Mutual deposit takers account for over 30% of cash ISA balances. They employ approximately 50,000 full and part-time staff and operate through approximately 1,900 branches.

We welcome the opportunity to comment on the proposed changes in PRA fees.

Q1: Do you support the rise in PRA minimum fee in line with the increase in the PRA AFR for next year?

Implicit in this question is the assumption that regulatory fees move only in one direction – upwards.  This should not be the case.  The PRA needs to examine its costs and look at ways to minimise them.  Much of the banking sector’s regulation is driven by Europe – the Capital Requirements Regulation, for example – which means the PRA is not required to add anything to it, thus reducing costs. 

The mutual sector has worked hard to cut its costs while still delivering a high quality service to customers.  We do not see why the regulator cannot apply the same principles and deliver do the same.

Q4: Do you support the PRA proposal to review application fees to reflect the cost of processing applications?

We support this review and will, in particular, be interested in the PRA’s thoughts on the principle of sharing the cost of processing applications between new and existing firms.

Q5: Do you support the PRA proposal to change SPF recharge rates to reflect the cost of supervision?

We note the proposed changes and refer once more to our concerns, voiced in our answer to question 1, at the PRA’s apparent tacit acceptance of spiralling costs.

What would have been helpful in our consideration of the proposed rises in SPFs (though we note the hourly cost of one grade is reduced by £5) is a distribution of the various grades used in a typical special project.  If the most frequently used grade is, for example, a manager or “any other” then the benefits of the one reduced and two unchanged cost grades are lost.

6: Do you agree with the proposal to calculate the first year’s periodic fee of a newly authorised firm on a monthly pro-rata basis?

This seems a sensible proposal and more equitable than the current arrangement which sees the first year’s fees calculated on a quarterly basis.  We note the FCA is proposing a similar move.

Q7: Do you agree with the proposals for consumer credit application fees for dual-regulated firms?

We have no objection to the proposal that 50% of the application fee payable by dual-regulated firms applying for consumer credit permission will be due to the PRA.

We have greater concerns at the proposed steep rise in regulatory fees, compared to those currently levied by the OFT, for firms carrying out consumer credit.  While we welcome the proposals in the recent supplementary FCA paper to rationalise the proposed scales and to reduce fees for smaller but complex firms seeking full permission, our concerns remain.

Click here for link to consultation paper.