Why mutuals matter
While working at Oliver Wyman, I had the privilege to co-author a report titled “Co-operative Bank: Customer Champion” for the European Association of Co-operative Banks in 2008. I wrote this with Mark Weil, who subsequently became the CEO of Marsh UK, and then TMF.
With the help of a project team, we had the opportunity to study the co-operative banking sector and get to the heart of what made it both unique and vital to most of the major national economies in Europe.
The title still resonates with me today – co-operative banks (or mutual / building societies) are uniquely placed to be Customer Champions within the Financial Services sector. After all, the customers, via membership, are the owners of the organisation. A well run building society doesn’t need to profit maximise to appease foreign or institutional shareholders – instead it should be maximising the benefits of membership for its own customers.
My key learnings:
- The co-operative banking sector provides an effective check and balance on the influence of commercial banks. One of the key analyses (Figure 7) showed that the larger the market share of the co-operative (or mutual) banking sector, the fewer complaints per capita to the financial ombudsman in that country.
- The importance of brilliant Execution (best measured by organic growth)
- Why Membership is a key concept and must be kept vital (best measured by a high proportion of customers being active members)
- Capital must be managed effectively (best measured by the common equity tier 1 ratio aka CET1) – striking the best balance between maintaining a loss-absorbing buffer, and either putting capital to work or releasing it back to members
- Good Governance is essential given the unique “customers are the owners” model and “one member, one vote” principle (best measured by member engagement)
- A thoughtful approach to Expansion is needed if the benefits of co-operatives are to be made available to more people (best measured by growth in the co-operative / mutual sector – both at home and abroad)
2 thoughts on “Why mutuals matter”
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James at one time I agreed with your seniments, after 58 years as an owner with nationwide I totally disagee. I started with my first mortgage, over the years I have moved funds to other institutions, including banks as Nationwide was so poor, but those at the top got very rich. I wrote to Joe Garner, I looked at a job in the west country for a brain surgeon salary £11400 per annumm, Garners in my view imoral pay was 14 times this. It is reported Ms Crosbie will get 4.8 million. Demutalise and become a share holder or die and get nothing to pass on to your nearest and dearest. because of the November 3rd 1997 cut off, those members are out of the frame, those tha are left a re getting older and will die. Those left will be impotent “members” but no owners. I recently look up how many savings products we had there were 85 some paying 0.1 % this our employees loking after or older owners. I must have struck a cord with the implication I was making that number has now dropped to 13 savings accounts. What about the takeover which was done unilaterally with out consultation, ” Owners” give me a break. I wish you well my wife wish you every support.