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UK building societies complain to FSA

The 52 building societies in the UK have en masse complained to the FSA (Financial Services Authority) with regards to new lending instructions which will impact upon building societies but leave UK banks unaffected. Despite the fact that the UK government was the party which reduced the historically onerous regulations on building societies raising further funds, yet again we see a U-turn on the way.

In simple terms, the new regulations will see building societies split into three separate categories, traditional, limited and mitigated which will limit the amount of debt these societies can take on depending upon their category. While it is a sensible move to try and limit the exposure of the UK building society sector to sub-prime loans and more high-risk investments, many believe this is a case of "bolting the door after the horse has bolted". It is also a case of the small minority of building societies who took on extra risk holding back those who were more risk averse.

The very fact that these new regulations for building societies will not apply to the banking sector automatically places them at a disadvantage on a competition level. This could reduce overall competition in many areas of the UK financial sector at a time when the government has promised to "increase competition".

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