As we know, there\’s all sorts of people telling us that it\’s finance capitalism which is the problem. Those shareholders greedy for their returns: if we just got rid of them and had mutuals as the major part of that finance system then all our worries would go away.
Capital adequacy is a mutual headache for UK\’s building societies
Ye see? If there aren\’t any shareholders, then where is the capital going to come from?
There\’s no suggestion that Nationwide has a problem. But at the moment the only way it can rebuild capital is through retained earnings which means less competitive rates for customers. Its margins have already shrunk drastically as the official Bank rate has hit 0.5pc. Its ability to provide consumers with credit, to help get the housing market and wider economy going next year, is severely constrained given the combination of losses on bad loans and increased regulatory demands on capital.
Sure, shareholders take profits out when there are any….but they also provide the capital when more is needed. Mutualisation just ain\’t the silver bullet some seem to think.