Financial Services (Rural Communities)

Part of the debate – in Westminster Hall at 12:00 pm on 29 March 2011.

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Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury 12:00, 29 March 2011

My hon. Friend makes an important point to which I should have responded earlier. He lays down a challenge about the burden imposed on building societies and other financial services organisations. The FSA has looked carefully at the regulation of building societies. He will be aware that building societies were affected during the financial crisis, and there were several rescues as they had to consolidate. The concern is that a number of them moved into areas in which they were not entirely comfortable or well resourced to deal with, and that put the building society and depositors at risk. We need to ensure a proportionate regime for regulating building societies that recognises the risks posed to members and financial stability.

One area in which the Government are taking forward further work to support building societies, and an issue building societies have raised as a consequence of the financial crisis, is the need to find new sources of capital. We are working closely with building societies to identify an instrument that enables them to raise capital markets, will help absorb losses if they occur in the future, and is consistent with enhancing the stability and security of the building society sector. We are taking active measures to strengthen the mutual sector because we believe that its diversity can act as a spur to further challenges to the banking sector. It is an important part of the architecture of financial services, not just in terms of providing mainstream products, but in trying to provide greater access to groups that are harder to reach.

I have been fortunate to have enough time to expand on the subject at some length. I hope that my hon. Friend will recognise that although the Government cannot intervene in the individual decisions taken by banks and building societies to close branches, we are committed to taking further steps to improve access to financial services throughout the country, in rural and urban areas alike. We recognise that particular challenges face financial services in rural areas, and we will continue to look carefully at those issues and listen to concerns raised by hon. Members.