Ben Chu: Mutual benefits at Nationwide

Outlook Nationwide will have longer than Barclays to meet its 3 per cent leverage target. The mutual has to reach the target by 2015. But the management isn't very happy about it. Chief executive, Graham Beale, complained that the leverage ratio set by the regulator at the Bank of England is "crude" and "unsophisticated" because it ignores the fact that Nationwide's balance sheet is full of safe residential mortgages. The trouble with this analysis is that no one really knows in advance of a crisis which assets are safe and which aren't. That's why it's prudent for all lenders to hold decent capital buffers to cover unexpected losses.

And, as it happens, "crude" and "unsophisticated" sounds a pretty good description of Nationwide's remuneration system. In 2012-13 Mr Beale was awarded a pay package of £2.26m – less than Antonio Horta-Osorio at Lloyds (£3.38m) and Ana Botin at Santander (£3.96m), but in the same league as Jenkins at Barclays (£2.6m). And it was well in excess of Stephen Hester's (£1.65m) at the Royal Bank of Scotland. That seems high for the boss of a mutual society.

And bear in mind that since Nationwide does not issue shares, Mr Beale receives his remuneration entirely in cash. So that's money straight out of the lender's profits – money that could have been used to replenish the equity cushion. If Nationwide needed to hit the capital target faster, it could always pay its boss a little less.

The mutual's accounts relate that Mr Beale asked for his bonus to be capped at the same level as 2011-12. But the fact that his remuneration could have gone up in a year in which Nationwide announced higher losses on commercial lending, and also increased its provision for mis-selling payment protection insurance, points to a pay system that's just as deficient as those that exist at the big banks.