Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): I welcome Michael Boyd, chief executive of the Progressive Building Society, and Robin Fieth, chief executive of the Building Societies Association. We are grateful to you for your time and for joining us. I invite you both to make opening statements — I mean this in the nicest way possible — with an emphasis on concision. We have a big evidence session today, and we want to get to questions. If there are any points that you are not able to make in your opening remarks, I am sure that you will be able to fit them into your answers. We will welcome brief answers from you both. We will start with you, Michael.

Mr Michael Boyd (Progressive Building Society): Thank you very much, Chair and members of the Committee, for the opportunity to speak to you today on the role of the Progressive Building Society in the financial services landscape in Northern Ireland. As chief executive of the Progressive Building Society, I am proud to lead an organisation that is rooted in mutual ownership. It is all about our members and not shareholders. Our members are at the heart of everything that we do.

We are locally owned, so it is about local people making local decisions for local people. We are run by a board locally, which is based in Belfast. We have 11 branches across the Province: in Belfast, Newtownards, Bangor, Lisburn, Portadown, Enniskillen, Omagh, Derry, Coleraine, Ballymena and Glengormley. We have 190 staff, two thirds of whom are based in our head office in Belfast and in our Belfast branch. The other third of our staff are based in the other branches across the Province.

Being a mutual society, our profits do not go to external investors; instead, they are reinvested into the workings of the society in order to make it better for our members. We have calculated a mutual dividend that is based on last year, 2024, which comes out at about £6 million. That means that we can offer better mortgage and savings rates than the average across the UK. That works out at about £60 per member — they are better off by that amount, whether that is for savings or for mortgages. The mutual model gives us the freedom to act in the best interests of our members and the communities that we serve. We are very much a community-focused organisation.

One of the key ways in which we have an impact on the regional economy is by providing affordable access to savings and mortgages. Our society supports local families and businesses by facilitating homeownership and financial security and well-being. Every mortgage that we offer and every savings account that we manage has a direct impact on and benefit to the region. It ensures that money stays locally and fuels further economic benefit. Our presence in the high street remains the cornerstone of our regional economy, and our branch locations mean that we support urban and rural communities.

We have calculated our financial impact on the Northern Ireland economy. In 2024, it came to about £90 million. That includes the salaries and taxes that we pay, the volunteering that our staff do across the community and payments to local suppliers.

Last year, we refurbed the Newtownards branch and reopened it just before Christmas. That was half a million pounds of investment. When we get through all 11 branches, we will have invested around £6 million across the Northern Ireland economy. That is all about local building firms, architects, engineers, electricians, plumbers etc.

We pride ourselves on our core values of honesty and transparency and on the energy and passion of our staff. We endeavour to build a culture of trust, which is the foundation of long-term relationships, and that is key to the business that we do. Our people are highly trained and deeply committed to our values. We offer continuous development opportunities, and that has been borne out through Investors in People and the gold accreditation that we have. We offer an inclusive working environment, and that comes from all parts of the community.

We are committed to supporting the environment, reducing our carbon footprint, managing our use of resources and ensuring that the products that we offer help the environment. We have green mortgage products that help to improve energy efficiency. For our borrowers, we have a 0% interest rate two-year product for energy efficiency home improvements, which is key to helping this part of the world.

In local communities, we support initiatives, charities and community development. In the past year, we have supported 50 small community endeavours that have supported the elderly, vulnerable people and those with disabilities. Some of that was done from small financial donations and some from volunteering. We cover a wide range of events and activities from phone calls to those who are lonely to funding chat and craft groups. Those activities are crucial to the communities in which we live and work.

On a society-wide basis, we have had a partnership for the past six years with Disability Sport Northern Ireland through which we have supported over 10,000 people in taking up opportunities to do sport, irrespective of their disability. Last year, we helped four further larger local charities: Autism NI, Shelter NI, NI Hospice and Women's Aid. We are looking to develop those into five-year partnerships.

Financial inclusion is really important to us, and we are committed to that. We believe that everyone should have access to the tools and resources that they need to secure their financial future. Our investment in the branches is testament to that. In an increasingly digital world, not everybody wants to be digital. They want to speak to people directly, and we offer that. The products that we offer include regular savings products, which you can start with as little as £20 a month, and 0% deposits for mortgages through our partnership with the Northern Ireland Co-Ownership scheme.

Progressive stands as a model of mutual ownership, where the priorities are our members, the regional economy and the environment. We are committed to delivering value for our members, supporting our staff and the communities that we serve and promoting financial inclusion. Our continued success demonstrates the power of mutuality, and I look forward to continuing to support our members and communities for many years to come.

Thank you. I look forward to answering any questions that you may have.

The Chairperson (Mr O'Toole): Thanks, Michael. Over to you, Robin.

Mr Robin Fieth (The Building Societies Association): Thank you, Chair and members of the Committee, for the opportunity to brief you today on behalf of the Building Societies Association. We welcome your inquiry into the Northern Ireland banking and financial services landscape.

In his evidence a few weeks ago, Mr Fisher from the Irish League of Credit Unions explained that this year, 2025, is the International Year of Cooperatives. We support his comments that this is:

We represent, champion and support all 42 UK building societies, as well as seven of the larger credit unions across England and Scotland. Three building societies have a branch presence in Northern Ireland: in addition to Progressive, we are talking about Nationwide and Leeds Building Society.

All the building societies and credit unions are customer-owned financial institutions — they are financial mutuals. As you will know, building societies specialise in residential mortgage lending and retail savings. They are governed under the Building Societies Act 1986. Some societies, such as Nationwide, operate across the whole of the UK, and others, such as Progressive, have deep roots in their particular communities. When we look at it in total, we see that building societies have assets of more than £525 billion and, together with their subsidiaries, have mortgage books of around £395 billion, which is about 24% of the UK mortgage market. They hold nearly £400 billion of retail deposits, which is about 19% of UK retail cash deposits, and about 40% of UK cash ISA deposits. They employ around 52,500 people, and we have around 1,300 branches across the UK. I will come back to that in a moment.

Building societies started in the UK in 1775 in a pub in Birmingham, so this is our 250th-anniversary year. In the past year, you will have seen that two of our societies have acquired banks: Nationwide acquired Virgin Money, and Coventry Building Society acquired the Co-operative Bank. For the first time in our history, we have two mutually owned banks in the UK.

I will go back to branches and look at the track record. In 2012, building societies had a branch share — the share of the high street, if you like — of 14%. That is now over 30%. I was looking at the numbers for Northern Ireland. Since 2020, the building society share of the high street here has gone from 12·9% to 21·7%.

The Chairperson (Mr O'Toole): On that, Robin, by "share of the high street", do you mean the high street overall or high street financial services?

Mr Fieth: This is about bank and building society branches.

The Chairperson (Mr O'Toole): Yes, but is that a percentage of the high street overall?

Mr Fieth: Yes.

The Chairperson (Mr O'Toole): OK.

Mr Fieth: This is the share of the total branch population.

The Chairperson (Mr O'Toole): So the share of the high street that is building societies —.

Mr Fieth: Is now 21·7%.

The Chairperson (Mr O'Toole): It was 12%. I assume that that was, in part, driven by the faster closure rate of bank branches.

Mr Fieth: That is the point that I was going to make. If you look at the three building societies, you will see that they are the only retail banking institutions outside of credit unions that have not closed any branches since 2020.

I will conclude and re-emphasise some of the points that Michael made. The customer ownership model allows mutuals to focus on the long term, on domestic growth and on supporting their communities. They do not have external shareholders to satisfy. That gives them a particularly important dynamic. It also adds fundamentally to the structural resilience of financial services across the UK. Having a mutual sector that is a very large part of the mortgage market and the savings market and is embedded in the high street is a real dimension to financial stability, competition and choice.

We are delighted with the Westminster Government's commitment to doubling the cooperative and mutual sector as part of their decade of renewal. We are keen to engage with the Committee on how we can develop that further in Northern Ireland. Thank you very much.

The Chairperson (Mr O'Toole): Thank you, both, very much for your evidence.

Members, indicate if you wish to ask a question of Robin and Michael, as you always do if you wish to ask a question. Several of you have done so already.

My first question is for the purposes of the record and for clarification. Is it fair to say that the main difference between building societies and credit unions is, in many cases, one of scale? Nationwide is a fairly large financial institution. Is the ability to provide mortgages, which credit unions cannot do, the main difference? Are there other differences that you want to draw attention to? Obviously, both are mutually owned.

Mr Fieth: Chair, I would probably explain it in a slightly different way. Let us put Nationwide to one side, because it is domestically a systemic organisation.

The Chairperson (Mr O'Toole): Yes, it is.

Mr Fieth: The largest credit unions in the whole of the UK are larger than some of the smallest building societies. There are two key differences. One is that credit unions specialise more in unsecured lending than in secured lending. A small number of credit unions do limited mortgage lending, but it is very limited. Their primary business is in unsecured lending, and it tends to be smaller-value lending. The second difference is that they are limited under legislation to a common bond, so they have to define what their population is. That may be employment sectors, and it may be geographical areas. With geographical areas in particular, there is a statutory limit to the total population of the area, which is three million people. In Northern Ireland, that may not be such an issue, but, if you are in London, that limits you to being only in part of London. If you are in Glasgow, it limits you basically to being in the G postcode. It is those sorts of restrictions. They are all customer-owned. That is the area of commonality.

The Chairperson (Mr O'Toole): OK. The statistic that you gave us about building societies having grown as a percentage share of the high street in the past five years is really interesting. Is it that all building societies have made a decision that they want to remain on the high street because that is a core part of how they do business and their members probably would not wear it if they closed their branches? I am interested to hear your specific experiences. Robin, you can go first, and Michael can comment afterwards.

Mr Fieth: There is not a coordinated campaign, if you like, as you maybe suggested. I say that because some building societies have no branches and have never had branches. That comes down to their history. There is a building society in south London that, nowadays, is called Family Building Society, but it started out as a postal workers' building society. Funnily enough, it did not have any branches because it worked through the Post Office. There are others like that.

Increasingly, we have seen from the building societies that run branch networks a commitment to maintain them, invest in them and, in some cases, be inventive about how they do that in supporting their local communities by cohosting branches. You will have seen some pledges that they will not close any branches. Nationwide, for example, has said that it will not close any branches until at least the beginning of 2028. It is keeping that under review; it has gone out a year or two at a time. No one can make a permanent commitment, but there is a definite commitment from our sector to support the high street. There is quite a lot of evidence that supports not only that as a building society strategy but the fact that it impacts positively on those communities. We saw research at the end of last year that suggested that, if there is still a building society or a bank branch on a high street, the profitability of all the other businesses on that high street will be about 20% higher than it would otherwise be. You can sometimes take such research with a pinch of salt, but the direction is definitely there.

The Chairperson (Mr O'Toole): Michael, perhaps you could give us your perspective. Has Progressive ever shut a branch?

Mr Boyd: Yes, we did — in 2019. We had two branches in Belfast city centre. They were within about 300 yards of each other, and the economies of scale meant that it was better for us to be in one location. I have been —.

The Chairperson (Mr O'Toole): Was one on the corner of Great Victoria Street?

Mr Boyd: We had one in Arthur Square and one in Wellington Place, which is our head office. That is the one that has remained open.

Over the last number of years, we have increased our spending on digitisation, which has opened us up to a new cohort of potential members. That is really important in this day and age. It is not only to open us to new members; it is to improve our operations and make us more efficient and effective. It gives us access to new cohorts of people. However, lots of people still want face-to-face interactions with the people who are taking in their savings daily and to build up trust and community awareness. It is important for financial inclusion that we continue to have branches and modern, accessible places on the high street for people to go to transact their financial business. We are in and of the community, and it is important that we are physically in the middle of that community. That is why we are investing in the future in our branch network, alongside investing in the future with our digital offering.

The Chairperson (Mr O'Toole): That is really helpful.

I will open the questioning to members. Members, please keep your questions directed and concise, given the amount of evidence that we hope to get through today.

Ms Forsythe: Thank you both for being here. It is very informative, and I thank you for the briefings that you provided in advance. There was some great evidence.

I looked at the map in your paper, Michael. I represent South Down, so, naturally, my eye goes to my constituency. I want to ask about the balance of customers — rural versus urban — that you find across Northern Ireland. In my constituency, you have an agent but not a branch. What is the difference in the service provided between the branches and the agents?

Mr Boyd: The difference between branches and agents has probably reduced in recent years. Five years ago, our branches offered mortgage services and savings services. We still offer mortgage services in our branches but to a slighter lesser extent. We have centralised a lot of that functionality for efficiency reasons, while keeping people who understand mortgages or are mortgage advisers in the branches. That is important.

The agents are not our employees; they are other businesses that we have partnered with. We have eight agents, two of whom are in your area of Kilkeel and Newry. They are not our businesses as such and not our employees; they are trained by us and have access to our systems. They are effectively small savings branches that give lots of good access to the wider, more rural community. Commercially, there would not be enough footfall for us to have a fully operational branch in those areas, and the agents' network gives us that opportunity.

Ms Forsythe: Do you pick up quite a lot of customers across the rural areas in Northern Ireland?

Mr Boyd: Yes, we absolutely do. Rurality is important for us. Northern Ireland is a pretty rural community, and the locations that we have help to support financial inclusion in those areas.

Ms Forsythe: That is great. Thank you very much.

Dr Aiken: Thank you, Michael and Robin, for coming today. I have two short questions.

Michael, I noticed that, in your response to the question about the creation of a cooperative mutual bank, you said that we do not need one: will you explain why?

Mr Boyd: We have lots of banking opportunities in Northern Ireland. There is lots of competition in the market. We have local banks, the big GB banks and the mutuals. We have talked about location: we are well spread across Northern Ireland. We now also have the banking hubs that have developed in different areas of Northern Ireland from Portrush to Newry and South Down. We offer the opportunities across Northern Ireland without a mutual bank. I am aware that, in other parts of the UK, they have tried to do that and have not got some of them quite over the line yet. There would need to be quite an injection of capital, I suspect, to get a new bank up and running.

There are opportunities for the likes of Progressive to have technology in its branch network to enable the transaction of lodgements and withdrawals from any bank. The Post Office network is already very much in that space. The difficulty for us in bringing in new technology is that the funding for it would not be there. We would effectively have to subsidise the work of the banks. However, if there was a model similar to the funding of the Post Office to transact those services, we would be keen to do something like that across our network.

Dr Aiken: OK; thanks. Will you explain your partnership with Northern Ireland Co-ownership? We are looking to build more social housing, and the Minister for Communities is rightly using financial transactions capital (FTC) funding for what it is supposed to be used for. We heard evidence from the Welsh and the Scots, hence the question about mutualised banking and the community banking process. How does the relationship between you and the co-ownership scheme work?

Mr Boyd: It is a partnership. We used to do bits and pieces of it, and we have really tried to pick up on that. A mutual building society has a moral responsibility to help people onto the first rung of the homeownership ladder, and that partnership helps us to do that. There is a range of products, but they start at a 50% mortgage and a 50% rental. It is a subsidised rental on behalf of Northern Ireland Co-ownership. It means that you do not have to put down a deposit. There are then steps where you can buy in the additional equity, so that, over a period, you can become a full homeowner through that product. It works really well. We are trying to develop more products around that, so that we can support it. We did about 20% to 25% of the book last year with Co-ownership.

The Chairperson (Mr O'Toole): Is that 25% of your mortgage book?

Mr Boyd: No, 25% of Co-ownership's for last year.

Ms Dolan: Thank you, both, for coming in.

Robin, in your written submission, you were critical of banking hubs and the cost. You prefer multi-bank kiosks within building societies. However, the closures of bank branches have been predominantly in rural villages and towns where there is no building society building. In that context, are multi-bank kiosks a good solution, and is there scope for more building societies in areas where banks have closed?

Mr Fieth: Thank you for that question. We are not against banking hubs at all. The Westminster Government have committed to having 350 across the UK. The key point, though, is that there are an awful lot more than 350 communities that will not have a bank or building society branch. The banking hubs have a role to play, and we will see that evolve. UK Finance, whom you are seeing later this afternoon, are far closer to the banking hubs, because it is clearly their members that are involved, so you can explore that with them rather more.

To come back to the point that Michael made a few moments ago, we have been trialling in four building societies a universal paying-in and paying-out machine of cash and coins, which we see as being a supplement to banking hubs. Where a building society is the last branch on a high street — there are 142 communities in the UK where that is the case — we see that as an opportunity, in addition to banking hubs, to help those communities with at least the basics of banking. It is important to say that that is additive, not instead of.

The long-term future of banking hubs will play out as it will, and that will depend on how well they are used, how they evolve, the services that they can provide and whether they prove to be useful to communities.

Ms Dolan: Michael, with just 11 branches, Progressive is limited in the face-to-face contact that it can provide to customers. Are there plans to open additional branches across the North?

Mr Boyd: Not at this stage. We have a five-year strategic planning period. We do not plan to open any new branches, although, as I mentioned, we are refurbishing all our branches over that time frame. We have to be aware of the cost implications of opening new branches. It is expensive. We are committed to keeping our current branches open, at least over that time frame.

Ms Dolan: I have a couple of constituency issues that I will follow up with you in the interests of time and confidentiality when we are offline.

The Chairperson (Mr O'Toole): I probably speak for most Committee members when I say that we are keen to see high street services protected, and building societies and other mutual institutions, including credit unions, are doing that while banks are not. We welcome that, and we will explore the branch picture with the banks in a moment or two.

This question is for you, Michael, but, Robin, you may be able to give a broader perspective with UK-wide examples. Have you noticed customers from other banks migrating to you because they want to go into a branch and talk to someone? They may have heard of the Progressive and know that it is a familiar part of the high street. They may have always banked with one of the traditional Irish banks — I will not name any — that is no longer on the high street and have gone to your institution. Is that happening?

Mr Boyd: It absolutely is. From time to time, you find that some of the other institutions, whether they be banks or building societies, may stop doing passbooks. That has happened recently. We have had an influx of people because we still have passbooks, and people like to have their passbooks in their hands and they know what they have etc, so that works well.

Where full banking facilities are concerned, ours is a savings institution, so we do not operate current accounts. We looked at that in the past but disregarded it, purely because we believe that we in Northern Ireland are probably over-banked, given the availability of different names out there. Our expertise does not sit in that space. Some building societies have offered that service across the UK, including the Cumberland Building Society. When all the local banks pulled out of that region, the Cumberland Building Society took up the mantle.

The Chairperson (Mr O'Toole): There is nothing legally preventing you offering the service. For example, the Nationwide is a current account provider.

Mr Boyd: There is nothing legally preventing us. You need an economy of scale to do it, and you do not get that on day one. At the minute, we have no plans to go into the current account market.

The Chairperson (Mr O'Toole): Robin, what do you notice happening at a broader level?

Mr Fieth: At a broader level, we see the same trends. When the last banks pull out of an area, more people come into building societies to open instant access savings accounts, for example, which can give them quasi-day-to-day banking. Lots of our members will say that they have a strong core of more vulnerable, generally elderly, people whose pensions or benefits are paid into their building society account because they do not have a bank account. They will come into the branch to draw out that money. Importantly, that is part of their social activity for the week. We very much saw that during the pandemic, when building society staff were reaching out to the customers whom they saw regularly.

The other initiative that is worth drawing out and that we see more across England is the fact that a number of societies are experimenting with shared branches. The branch is not shared with another financial institution; it may be shared with a library or a community centre. The Suffolk Building Society is launching a new shared branch in Felixstowe, where it has joined up with the East of England Co-op travel agency to share premises. Those two organisations have a similar ethos, so they work together well. Some of that is about how you sustain a branch network whilst minimising the costs that Michael talked about to make it economically viable and, at the same time, continuing to support local services that might otherwise be shut.

The Chairperson (Mr O'Toole): This has been a really useful evidence session. About 30 years ago, the story was often to do with demutualisation, and there were several instances of that. Halifax is an obvious example of a building society that demutualised — it was listed and became a bank, effectively — and members, in many cases, had a little windfall. Is that story over? Is it the case that you are not anticipating any demutualisations?

Mr Fieth: We are certainly not anticipating any demutualisations. As I said in my opening comments, if anything, we are mutualising banks at the moment, so the tide is moving a little in the other direction. It is worth remembering that not a single organisation that demutualised in the 1990s and early 2000s remains independent. In fact, of those, the only major brand that is still on the high street is Halifax, and that is probably for the very good reason that most people still think that it is a building society. If you ask people to list five building societies, they generally start with Halifax, even today, which is a little frustrating at times for us, and we are quick to point out that it is not a building society.

At the moment, we have a strong sector. All those building societies from the largest, Nationwide, down to the smallest, Penrith, which is a one-branch, head office-based building society with 27 staff, are doing very well.

The Chairperson (Mr O'Toole): My final question is about the regulatory picture. In the BSA submission — we do not have the power to do this, but, in our report, we will be open to making any recommendations or observations that are germane to the broader question — you effectively call for, if I construe it correctly, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) to take a more proportionate, from your perspective, approach to regulating senior managers in building societies, because, effectively, they are already more constrained in lending activity than banks. Is that a fair way of depicting it?

Mr Fieth: It partly is. I will make three or four points on that. On the prudential side, there is the whole prudential regime that, in the UK, in based on the implementation of Basel 3.1. We have been working with the PRA for about five years on the strong and simple regime for the smaller, simpler domestic players, and that is coming to a really good conclusion. We are at the final hurdle. We are seeing that proportionality, which really supports the smaller, lower-risk, straightforward banking organisations, including building societies. The changes to the senior management regime will apply to everyone, and that seems appropriate. It has been road-tested. That has been in place for few years, and it is time to review it.

Two other areas are worth highlighting to the Committee: the audit reform and corporate governance Bill that is due to come before the Westminster Parliament later this year and the review of what public interest entity means for smaller, simpler organisations. That is not just building societies; it is small-cap companies. Small companies that are listed on the main market are also public interest entities, and that attaches an incredibly heavy burden of compliance from an audit perspective and on the finance teams.

We talked about the importance of the cash ISA market to building societies. There is a lot of discussion about cash ISAs at the moment. It is worth remembering that there are two sides to the ISA market. The stocks and shares ISAs are really important for people who want long-term savings.

The Chairperson (Mr O'Toole): I advise people not to look at those at the minute.

Mr Fieth: Yes. Cash ISAs are really important for people who are saving for their first house or for a rainy day. We hear that quite a few elderly people are making sure that they have a good pot put aside to pay for their funeral.

Of course, if you are offering decumulation of pensions, you are always advised to keep a lot of money in cash. More important, having really stable sources of retail funding is crucial to the retail banking sector, including building societies, because that is the basis on which you lend. Disrupting that market potentially risks putting up lending rates, making mortgages and, indeed, unsecured lending less accessible. Those are our key points at this stage.

The Chairperson (Mr O'Toole): That is most helpful. There are no further questions at this stage, but that has been an extremely useful evidence session. Thank you very much, Robin and Michael, for giving us that perspective. Members will have found that most useful. We will follow up if there is any additional information that we need, but we have got a pretty comprehensive sense of where building societies are locally and more broadly. We will now invite you to depart. Thank you very much for your time, and please keep in touch with us on the matter.