When the government began drafting a modern company law six or seven years
ago, its mantra was ‘think small first’. This promise must ring hollow for Chris
As finance director of Hinckley and Rugby Building Society, he has seen red
tape and bureaucracy grow exponentially in the past six years.
First it was the N2 regime that brought all of the disparate financial
services regulators under one roof – the behemoth that is the Financial Services
Authority. The FSA rulebook now stretches to a massive 900 pages of rules. After
that, came what was known as N4, the Treasury’s regulation of mortgages and
Still, times change and the FD has to move with them. White’s apparent
sanguine acceptance of the new regulatory structure belies a certain hankering
for a simpler past, where there was a voluntary code and the regulator was a
Not all of the recent upheaval can be laid at the feet of the present
government. European directives, in particular Basel II, have had a hand in this
turmoil for the small business finance director. As have international
accounting standard setters. But as the regulatory puzzle is pieced together you
can begin to see White’s point when he complains of the burden to management and
irrelevance to customers, who are after his chief shareholders and stakeholders.
The current ‘one size fits all’ policy in financial services regulation is
most starkly seen in its imbalance in a business like HRBS. The building society
has 11 branches and five agencies in the larger towns and cities of the East
Midlands, and some of the smaller villages in the region. But it has to comply
with the same rules and regulations that FTSE 100 banks such as HSBC does.
‘As a small mutual organisation where we are trying to pay back to our
customers the benefits of being mutual, by giving them the best deal possible,
to be burdened with so much red tape is difficult. We have to deal with the s
ame set of rules as the clearing banks. It’s an extra overhead.
‘We don’t have hundreds of extra people to deal with it. It falls to the
senior management team to sort out. It’s a distraction from our main business
and I’m not sure customers are better off as a result,’ White says.
It might sound like the same old whingeing but if the call keeps coming that
the burden of regulation is weighing down on businesses then it might be time to
review the situation. Indeed, White suggests that all this change might not even
be bearing the fruits expected.
He points to industry concern over the length of mortgage interviews today
compared to in the past – the exact opposite of what the FSA intended. The
regulator’s aim was to get people to shop around more but White fears that
people shop around less because the process has become more onerous.
Regulation aside, the competitive pressures of doing business in the lending
industry remain. But White is upbeat about the status of HRBS as a mutual and
has no intention of merging with other societies in order to demutualise – a
popular industry trend of the past decade or so.
‘I don’t see a reason for another big spate of mergers. The small societies
have already been through the worst of the regulation and competitive pressures
and seen off the carpetbaggers. I can’t see why they would now want to throw in
the towel. It’s been a bit surprising some of the organisations that have
announced their intention to merge. I can’t understand their thinking.’ he says.
White prefers the speed at which things can get done in a smaller
organisation. ‘We have the advantage of short communication lines and the speed
to market is an advantage. We could have a product launch in a matter of days
while in a large organisation it would take much longer.’
HRBS works along the lines, White argues, of a sustainable, long-term
business aimed at the older generations. The product range is small and as
simple as possible and free of redemption charges favoured by the larger
lenders. The society shuns fancy, marketing techniques of the larger
organisations that aim to draw in the younger generation of house buyers with
low, short term lending rates.
‘We don’t have lots of bells and whistles, and all the tricks of the trade
that others tend to employ. A lot of the larger lenders rely on customer inertia
in the hope that people will stick with the higher rate. We don’t tie people in
artificially,’ the FD says.
Indeed what the society offers might not be of interest to the younger
generation, as it doesn’t provide internet banking and aims to works on a low
For someone who had no prior experience of financial services, White chose an
interesting time to join the sector as it has gone through one of the biggest
upheavals of any UK industry in the past ten years.
White’s accountancy training and initial career path, however, prepared him
for the pains of being a modern finance director in a complex sector. He
qualified with Thornton Baker, now Grant Thornton International, in Coventry
where he worked as an auditor. Later he moved to Coopers & Lybrand and
carried out audits for Peugeot and British Steel, now Corus, and no longer
After a respectable period within the firms he realised he wanted a financial
role that was more involved with the business so he got a job in Coventry
Climax, part of the Rover Group, (also a ghost of British business past).
A few years later, the then FD left the company and invited White, its
financial controller, to accompany him to a new start up, which was a new spin
off of the Rover Group, called Land Rover Parts & Equipment, based in
White helped set up the IT systems from scratch and ended up working as the
main interface between the IT department and the finance and management team
gaining invaluable experience in software, finance and business management.
He also had the challenge of dealing with the Iraqi government. Rover used to
supply Land Rovers, which were used as gun ships in Iraq back then.
In 1988 White decided he wanted to move to a smaller organisation where he
felt he’d have more of an impact on the business strategy. He joined HRBS as
financial controller with words of warning from Land Rover’s CEO who said he was
‘mad to leave such a lucrative business to go and join a doomed building society
that wouldn’t be able to compete with the likes of Barclays’. HRBS continues to
flourish. The less said the better about the Rover Group.
On the horizon for the FD is the prospect of the HIPS scheme, which will see
sellers obliged to pay for a housing pack before putting their property on the
market. Although still not finalised, and up against a tight deadline of summer
2007, White thinks the scheme might have an artificial effect on the market by
stopping sellers from putting their properties up for sale.
The cost of the packs, depending on the house price, is expected to range
between £500 and £1,000.
But HRBS is prepared for the expected slowdown in house price inflation and
even a chance of a small correction in the market place. ‘House prices can’t
keep growing as they have – but I don’t see a crash in house prices,’ he says.
There is no let up on the rule changes either. One of the greatest challenges
ahead for HRBS is the introduction of IFRS for non-listed companies. If the
deadline doesn’t move again the society will have to comply by 2009. Again White
feels this is a case of one size fits all and that the rules are too complicated
for an organisation like the regional society.
‘We will probably take the volatility instead of bringing in hedge accounting
by implementing a costly IT system that will add little value to the business or
our customers,’ he says referring to the highly complex and controversial IAS 39
‘Most customers find it hard to understand financial accounts, to expect them
to understand IFRS, it’s a joke. IFRS accounts are quite scary,’ White says.
Perhaps it’s time the government heeded its own clarion call of ‘think small
first’ before it’s too late.
Charity begins at HomeStart
When White isn’t grappling with Basel II and IFRS, he dedicates some of his
spare time to working as a trustee at a scheme run by a national charity called
HomeStart, a family support group.
As with many charities HomeStart has been struggling to attract volunteers
with a broad range of business skills. It has recently launched its ‘We’re
Asking’ trustee recruitment campaign, in which White is involved.
Its aim is to rally more people with finance and business skills to dedicate
time to become schemes trustees. Over this year the UK wide project aims to
recruit more than 500 volunteers with business experience to help manage its 337
White has been working with HomeStart for around six years and says that
volunteers develop new skills and it also boosts confidence in employees to know
that they are helping their communities.
‘A sense of involvement in the local community is very satisfying. I learn a
lot from managing the funds of the scheme here in Hinckley and it’s interesting
to see the politics of the voluntary sector and how it works,’ says White.
Trustees go through a 10-week training programme with HomeStart before they
can volunteer to support families. The biggest challenge for a trustee, White
says, is finding funds to keep the scheme going.
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