We are, again, watching this carefully, and it is why in 2010 we implemented the Building Societies Sourcebook to encourage appropriate risk management of lending and funding. The latter will be supported in future when we implement the net stable funding ratio which is the international standard to discourage reliance on short-term funding. We are also increasingly focussed on operational risks and the prudential implications of conduct risk, as I know are societies. I want to pick out one area of operational risk which is important, namely IT systems risk. One aspect of this is the cost and complexity of updating legacy IT systems in the face of growing demands on those systems from innovation in products. Cyber risk is also very high on our list of priorities. I recognise that not all societies have an internet presence, though I do know, of course, that you all use the internet. We will be seeking to ensure that cyber risk is properly tackled by societies as appropriate. In saying this, I am not seeking to pick out societies from other firms that we supervise, but we do think that these risks are in important respects common to all firms. Societies have generally been less affected than the large banks by conduct mis-selling costs, though not fully immune.
Looking at the sector beyond Nationwide – and I do this not to ignore Nationwide but because its size means that it has a large impact on averages – the average Core Tier One Capital ratio at the end of last year was over 17%, and the average leverage ratio was around 6%. The overall quality of capital is in our view in a good place and you have taken the implementation of Basel 3/EU CRD4 in your stride. In the four quarters to the end of last year, the societies (again not including Nationwide) contributed 22% of net new mortgage lending in the UK, which compares with a 9% share of the stock of lending. Arrears on first charge mortgages continue on a downward trend that we have seen for at least the last five years, and the building society arrears rate on average is lower than the average for all mortgage loans. All societies are meeting their liquidity requirements and quite a few of you choose to hold higher liquid asset buffers than our requirements, which is perfectly acceptable as a choice. Access to Bank of England liquidity facilities, which is an important form of insurance, has increased in terms of the number of societies having reserve accounts and preparing for the use of lending facilities should that be needed at some point in the future. Unsurprisingly, therefore, the overall position on ratings for those societies that have them has improved. So, it’s true, Harrogate really is the happiest place in England.