Top boss in downturn warning

1:29pm Thursday 8th May 2008

Comments (3)   Have your say »

The current economic downturn caused by the credit crunch is likely to continue for another two years according to a Bradford business leader.

Iain Cornish, chief executive of Yorkshire Building Society, said the £50bn injection of funds into the banking sector by the Bank of England would not in itself be enough to ease lending policies and restore mortgage lending to former levels.

Speaking at the Building Societies Association annual conference in Manchester, Mr Cornish said the move should help underpin confidence.

He said: " It is vital for the Bank of England to remain very close to what is happening in markets and it should not hesitate to intervene further and extend the (funding) facility if that is what is needed."

Mr Cornish, who steps down as BSA chairman this week, called on the Government to ensure that any long-term funding structures did not penalise building societies which had contributed least to the current crisis.

Building societies were well capitalised, highly liquid and prudent businesses that had entered troubled waters as fundamentally sound vessels.

Mr Cornish told delegates: "No society has anything like the reliance on wholesale funding that Northern Rock had and a number of other mortgage banks still have. As a sector we have high levels of customer trust, built on delivering value to our members.

"This is one of the reasons why building societies' net receipts in 2007 were over £16bn, the highest ever figure and almost double the figure in 2006."

This had continued in January and February with net savings inflows at their highest for ten years and the March figure a record for that month.

In the first quarter of 2008 societies increased their share of net lending from 19 per cent in 2007 to 25 per cent and were continuing to lend.