Introduced in 2015, the Sourcebook provided a structured framework for managing treasury and lending risks, including indicative limits and risk management approaches tailored to the unique characteristics of building societies. It served as a safety backstop, helping societies navigate risk while remaining aligned with their capacity to manage it, but all that is about to change.
The rationale for withdrawal is clear: building societies have matured in their risk management capabilities, and the prescriptive nature of the regime has created an uneven playing field compared to banks, which are not subject to similar constraints. The removal of the guardrails is expected to foster competitiveness and growth in the mutual sector, allowing societies greater flexibility in managing treasury portfolios and lending strategies, enabling them to compete more directly with banks.
However, with greater freedom comes greater responsibility. The discontinuation of the Supervisory Statement SS20/15 will require building societies to reassess and potentially uplift their risk management frameworks. Boards will remain accountable for ensuring robust processes are in place, proportionate to the scale and complexity of their business models.
The clock is ticking and boards that defer this strategic reassessment risk being exposed to outdated, non-competitive frameworks and heightened regulatory challenge. Of course, it’s not just building societies that will be affected by the Sourcebook retirement, all lending firms will need to adapt to an increasingly competitive environment.
There is a lot for all lending institutions to consider, including:
• Credit assessment – adapting underwriting standards to reflect broader lending opportunities
• Stress testing – developing more dynamic models to assess resilience under varied economic scenarios
• Risk-based pricing – aligning pricing strategies with risk appetite and market conditions
• Interest rate risk management – navigating volatility with more sophisticated hedging and duration strategies
• Liquidity management – ensuring adequate buffers and contingency planning in a more flexible environment
Whether you are a lender, investor, funder, or Chief Risk Officer, we’ve been helping regulated firms grow safely by providing expertise, bandwidth and objective perspective since 2008. Give us a call to discuss these and other emerging risks. We can assist firms in refining risk models, improving data quality and enhancing analytics.
We’ve been helping regulated firms grow safely since 2008, so give us a call to discuss these and other emerging risks.
