Financial institutions that held onto their mutual status have been proved right, according to a building society boss.

Rob Procter, deputy chief executive of Chatham-based Kent Reliance Building Society, said that the decision had been vindicated by recent events which have seen former building societies such as the Bradford and Bingley, Alliance and Leicester, Abbey, Halifax and Northern Rock lose their independence.

They were caught up in a headlong rush to demutualise and become banks, with members voting overwhelmingly for the change, driven by the desire to make windfall gains from share distribution.

But Mr Procter says that demutualisation made these new banks take risks they would never have done, or been allowed to, as mutuals.

"Our funding is safer because we don’t go in for these exotic things and our funding comes from our savers," he said.

The banks bought up parcels of mortgage debt without knowing the end borrower and whether or not they were going to make repayments. It was an unacceptable risk, says Mr Procter.

"We don’t do that - we write our own business. You want to be there for 25 years - you don’t want to be writing rubbish."

He said there was no need for panic among building society investors. "The ones who got into difficulty got into matters they didn’t understand. The building societies are very strong because they’ve kept the same models. We stick to what we know - the savings are safe and the mortgages are safe."

He added: "Our whole ethos over the last eight years has been to reduce costs so we could prosper in good times and bad."

Meanwhile, Kent Reliance, could face a £1 million bill to help bail out Bradford and Bingley. As a member of a compulsory financial services compensation scheme, it is obliged to stump up to save failing institutions.

Mike Lazenby, chief executive, said: "If one member of the club gets it wrong, everyone else has to pitch in." But he said it would make no difference to members as the the society was financially strong.