Financial mutuals have weathered the global crisis much better than their shareholder counterparts. While they have not been immune to the crisis, they have on the whole shown themselves to take fewer risks with savers’ money; and have not required the same level of assistance from Government as required by the private sector.

There is one fundamental difference between co-operative and mutual financial organisations and their PLC competitors; that they exist to provide a service for their members rather than create wealth for external shareholders.

This means that profits are shared amongst the members (consumers), rather than external shareholders. As the Building Societies’ Association has estimated, this provides them with a cost saving of approximately 35%, which is distributed straight back to the members - through the provision of low cost borrowing, high returns on savings and dividends.

In addition, the fact that these organisations operate using democratic voting systems, on a one-member-one-vote basis, allows them to take a long term view of their members’ interests. As we count the costs of other financial institutions’ short-term and high risk thinking, this approach to business should unquestionably be the future direction that we are looking for.

A stronger more vibrant Mutual Sector clearly has to play a role in this. We welcome the support that the Government has given through both primary and secondary legislation which has done much to level the playing field between mutuals and other business models. Yet more work needs to be done to establish what forms of governance, legislation and tax treatment would enable the mutual sector to thrive in the future.

It is also important that the burden of failure does not fall on those who least deserve it. Under the current set up of the Financial Services Compensation Scheme, the proportion contributed by institutions is based upon the deposits that they hold. In practice this has meant that financial mutuals have been punished for a safer business model in which they are funded through a higher proportion of deposits, paying on average three times as much proportionately as the shareholder owned institutions. The Government should introduce a more equitable scheme for funding the insurance of deposits of failed banks. Mutuals should not be punished for thinking long term; we should encourage safe banking, not casino capitalism.