Call to create Minister for Mutuals
The Government should create a new Minister for Mutuals to help promote the sector and put competitive pressure on the big banks, a report said.
A strong mutual sector would help to create a more stable and robust financial services sector with a greater diversity in attitudes towards risk, according to a University of Oxford report.
Professor Jonathan Michie, director of the Oxford Centre for Mutual and Employee-Owned Business, said the dominance of the big banks and large shareholder owners businesses was detrimental for both consumers and the UK's long-term economic stability.
He added that the dominance of the shareholder model in the UK, with its aim to maximise financial returns for shareholders, was one of the factors which caused the credit crunch and the recession.
But Prof Michie said mutuals needed a greater market share in order to put real competitive pressure on the big banks.
The Government has already expressed its support for mutuals in its Coalition Agreement, but Prof Michie is calling for it to go a step further and appoint a Minister for Mutuals to support and promote the sector.
The minister would have responsibility for mutuals in all sectors, including manufacturing, retail, football clubs, health and education, as well as the financial services sector.
Prof Michie said the Bank of England should also be made more accountable about its decisions relating to mutuals, and it should be required to report annually on the diversity in the financial services sector.
He added that regulation for banks and mutuals should also be proportionate, as larger players currently had a competitive advantage over smaller ones, as they were better able to absorb costs.
The report also called for a change in attitude towards mutuals among regulators and the media, who Prof Michie claimed were biased against the sector because of its inability to raise capital quickly. He said nationalised bank Northern Rock should also be re-mutualised.