UK building society funding arrangements set to change
The Financial Services Authority (FSA) is this weekend in talks with a number of building societies in the UK amid rumours of a significant change in funding arrangements. Just a few months ago, after pressure from the sector, the UK government increased the options open to UK building societies with regards to funding. However, in light of the significant downgrade by debt rating agency Moody's, it would appear that the UK authorities are set to clamp down on "excessive lending".
This is a major issue for the UK building society which, despite the ever increasing domination of UK banks, continues to attract the attention of many savers and mortgage customers. The Northern Rock flotation on the UK stock market led to a significant reassessment of building society lending restrictions which many now believe was at the heart of recent issues. There are concerns that the sector as a whole is set to suffer because of the weak balance sheet and business structure of a small minority of UK building society.
However, the UK government will need to be very careful regarding any major changes to the UK building society sector as any increased cost of borrowing will inevitably lead to less competitive rates for UK mortgage customers.
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