Regulation > Consultation Paper 09/17: A Specialist Sourcebook for Building Societies June 2009

Published: 1st August 2009 by William Webster

The general thrust of the CP is that Societies must prove that they have both the management and the systems capable of effectively dealing with the risks they face. This is part of the enhanced supervisory approach now adopted by the FSA. It states that systems and controls must match the level of complexity in a firm's business model. The FSA will adopt a more interventionist approach in order to ensure this is the case.

The proposal is that building societies and the regulator will determine whether the risk management policies adopted are appropriate. Where they are not the Society can either simplify its business or improve its risk management.

The FSA also intends to limit societies diversifying their business without a full assessment of capital adequacy.

The FSA has considered applying similar CP 17 guidance to the banking sector but has decided on account of the "lack of homogeneity" that this would not be practical and in their case a firm-by-firm approach is more appropriate.

The CP addresses treasury and lending. It contains five approaches to treasury management, three areas of treasury guidance and three approaches to lending.

Consultation closes on 5th September 2009 with implementation due in early 2010 when a new Building Societies Sourcebook (BSOCS) will replace IPRU-BSOC.

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Policy Statement 10/5 A specialist sourcebook for building societies: Enhanced supervisory guidance on financial and credit risk management. March 2010. The following refers to treasury management What's it about? This PS follows on from CP09/17. It's about how the FSA expects building societies to manage their treasury business. The resultant Building Societies Sourcebook (BSOCS) isn't too complicated but putting it all into practice may prove to be a challenge. A society is expected to align itself with one of five approaches used to define treasury risk management.

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