FSA chief executive John Tiner has defended the regulator's recent focus on providers' capital requirements by stating there is no conspiracy to rid the industry of firms of ‘mutuality'.
Speaking at the Building Societies Association annual conference yesterday, Tiner attempted to appease concerns about new proposals for minimum capital requirements and with-profits reform, which mutual firms say effectively forces them to become stockmarket-listed companies.
"This seems an ideal opportunity for me to dispel again the myth that there is an FSA conspiracy against the mutual sector: our formal position is one of neutrality about the merits of a mutual structure compared to a proprietary one," says Tiner.
“But we do recognise that some forms of business require more capital than this and that for a mutual typically the choices for raising new capital – if needed – can be more limited than for joint stock companies,” he adds.
Under realistic reporting reforms, all financial services providers are required to ensure they have sufficient capital to support all liabilities, and state how much of a multiple that capital might be.
However, these changes have come under fire from mutual companies offering with-profits funds in particular, as current proposals for with-profits reform – in CP207 – require all surplus funds to be distributed among with-profits policyholders.
Alisdair Buchanan, group head of communications at mutual insurer Royal London Group, says recent FSA moves on capital requirements are not necessarily seen as an agenda or “conspiracy” against mutuality, rather “it is unfortunate the proposals have the effect of damaging business models”.IFAonline
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