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The independent, non-governmental body - which has statutory powers under the Financial Services and Markets Act 2000 - has revealed a change to the way that building societies operate.
From April 1st, building societies that do not improve their risk management procedures or show the skills required to operate safely will be told by the FSA to move to a simpler business model.
More appropriate risk management must also be adopted. Those organisations that do meet the FSA's standards will be given flexibility as to how they operate, as long as it is within the remit of the Building Societies Act.
"Recent experience has shown that some building societies diversified without having the necessary skills and systems to manage the risks they were undertaking," the FSA explained.
Risky diversification requires more robust management skills and controls, which the FSA expects building societies to demonstrate.
Posted by Sara Secker
