Building society anger at bail-out
Updated on 12 January 2009
Building societies called on their members to protest about the "unfair" contributions the sector is having to make to bail out failed banks.
Societies are urging their members to write to Chancellor Alistair Darling and their local MPs about the levy they are paying to depositor safety net the Financial Services Compensation Scheme (FSCS).
The sector argues it is unfair that it is having to pick up a huge bill to compensate savers who lost money through the failed Icelandic banks and Bradford & Bingley when building societies are more prudently run.
It warned the money would have to come out of societies' reserves, as unlike banks they do not have shareholders to tap for cash, and this could hit the returns they are able to pay savers and the mortgage rates they offer borrowers.
A Building Societies Association spokesman said: "They feel it's unfair. Building societies are more prudently run and they haven't followed the high risk strategies that their competitors have, but they are being asked to pick up the bill."
The Government is lending around £20 billion to the FSCS following the collapse of Icesave and Kaupthing Edge and the nationalisation of Bradford & Bingley.
But to ensure taxpayers do not pick up the tab, banks and building societies are having to pay interest on the loan at commercial rates during the coming three years.
Building societies are understood to be particularly unhappy about the fact the payments they have to make are not linked to the risk of them failing, but are instead based on the level of deposits they hold.
It is estimated the UK's biggest building society Nationwide will have to pay the scheme £250 million during the coming three years.
A Nationwide spokeswoman said: "We are in a strong position but it is a sizeable amount and it certainly has an impact. Our members are being hit hard even though they chose to save with an institution that is safe and responsible."
These news feeds are provided by an independent third party and Channel 4 is not responsible or liable to you for the same.
