Mutual benefits

[Re: It's not all bad: Britain is becoming safer despite recession, Friday]

Allister Heath is sceptical of mutuals’ ability to add something positive to the market for banking services. But the contribution of mutuals is simple – diversity. For too long, the banking sector has been dominated by a model that emphasises maximising returns to shareholders and management, rather than to customers. Not surprisingly, there have been complaints about poor customer service and an inability to prioritise customer needs. There are dangers in putting all our eggs in the Plc basket. Boards of Plcs have a fiduciary duty to operate in the interests of owners – shareholders. In banking, this does not necessarily work, creating space for institutions that are legally accountable to their customers – mutuals. This model leads to a different set of incentives and behaviours. Building Societies Association (BSA) research shows that customer perception of service across a range of measures, including trust, value for money, treating customers fairly, dealing with complaints, looking after those in financial difficulties, and playing a valued part in local communities, are higher in mutuals than in Plc banks. Building societies know that, when they serve a customer, they are serving one of their owners. It is not surprising that this affects their level of service. It’s time to give mutuals a fair wind. They offer low costs, high customer service, good products and require little taxpayer support – not characteristics we can readily associate with Plc banking.

Adrian Coles, director-general of the BSA