Kent Reliance Building Society

BSA plays down return of securitisations trend

Rachel Wylie, public affairs manager for the BSA, said: “Building societies were not the cause of the financial crisis, we were not immune to it and had some casualties, but were not the cause.

“Returning to securitisation is not a bad thing but shows the sector is revitalising.

“We are slowly coming out of the difficulties of the past few years and had some good results.”

Securitisation was a contributing factor in the financial crisis leading to the downfall of many lenders, including Northern Rock in 2007.

However, Northern Rock plc, the ‘good bank’ conducted a £370m securitisation in March this year, followed by Skipton Building Society in April with a £500m offering and Yorkshire Building Society at £750m in June.

In June a freedom of information request revealed that the FSA had held an Arrow risk assessment meeting in February 2006, attended by several FSA staff where “securitisation was not perceived to be a problem.”

By mid-2007, the FSA warned about Northern Rock but, by 14 September 2007, Northern Rock’s effective failure as an independent bank was in the public domain.

A report from the Bank for International Settlements, released in July, blamed participants in the securitisation chain who furthered their own interest ahead of other investors, adding: “This resulted in poorly-underwritten assets being securitised by originators and those securities being bought by many investors who did not understand the extent of the risks they were taking on.”

There has also been much merger activity in the sector. In September 2010 Stroud and Swindon Building Society merged with Coventry Building Society. Coventry Building Society has also expressed a desire to acquire Northern Rock.

In February Kent Reliance Building Society transferred its engagements to OneSavings Bank plc, part of the Kent Reliance Provident Society Group following a deal with private equity firm JC Flowers.

In April Norwich & Peterborough Building Society announced proposals to merge with Yorkshire Building Society.

Ms Wylie said while the JC Flowers and Kent Reliance deal worked for that particular society, it was not a blueprint for the sector, adding: “many societies are doing well and serving the communities they have always served”.

Jonathan Cornell, head of communications for London-based First Action Finance, said: “There will be continued consolidation as the big guys will get bigger and the smaller ones will struggle.

Kent Reliance Building Society gets banking ... - Trinity Financial

Kent Reliance was able to transform the way it operates because of a £50 million capital injection from private equity firm JC Flowers & Co. The building society was Britain’s twelfth largest with 102,000 members and it dates back more than 160 years.  Savers will become members of the Kent Reliance Providence Society, which will hold a majority of ordinary shares in the OneSavings Bank.

Mike Lazenby, chief executive of Kent Reliance, said: “This is the culmination of more than a year of consultations with our advisors, working to produce a structure capable of introducing fresh capital into the business, whilst retaining mutuality for our members - we are effectively taking our mutuality to another level.”

“We will be a bank run on mutual principals, providing customers with affordable, competitive banking services - whether they choose more traditional branch-based forms of banking or whether they deal with us online.”

February 4, 2011

Trinity Financial is a trading name of Jed Newton and Vestprop Financial who are appointed representatives of Intrinsic Mortgage Planning Limited, which is authorised and regulated by the Financial Services Authority. Intrinsic Mortgage Planning Limited is entered on the FSA register ( http://www.fsa.gov.uk/register/ ) under reference 440718.

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