All building societies and banks are required to pay a levy to the Financial Services Compensation Scheme (FSCS) as part of the government’s bailout of the failed financial institutions such as Bradford & Bingley, and the Icelandic banks.
In our opinion our contribution to the FSCS, and that of other building societies, is a disproportionate share of the compensation costs for the failed institutions, which operated much more risky business models.
The allocation of payment to the FSCS relates to the size of each contributor’s retail deposit balances. Building societies, which have the majority of their funding from traditional retail savers, will pay (relative to their total balance sheet) much more than banks who have relied excessively on wholesale funds - which experience has shown to be a much more volatile form of funding.
The impact on the Yorkshire has been a charge in our 2008 Accounts of £14.7 million, which has had a significant impact on our pre-tax profit. To put this into context this figure, as a percentage of total assets, represents three times more than the levy paid by Northern Rock and twice as much as HBOS, which clearly demonstrates the unfairness of the calculation used to apply the levy against the more prudent business model of building societies.
All building societies and banks will be required to make further payments to the FSCS in future years which, unless changes are agreed, will continue to be calculated based on retail savings balances.
For building societies the FSCS bill comes out of the profits and is therefore ultimately paid for by our members - the Society’s savers and borrowers.
We are lobbying hard to protect our members from further inequitable payments to the FSCS. The issue has been highlighted in Parliament by Ann Cryer, Labour MP for Keighley, who has tabled an Early Day Motion (EDM) which is gaining the support of a growing number of MPs - over 150 at the beginning of March. You can view the EDM through the link below:
http://edmi.parliament.uk/EDMi/EDMDetails.aspx?EDMID=37446&SESSION=899
We would urge all our members who agree that the current arrangements are unfair to support this campaign by writing to their local MP and where your local MP has not signed up to the EDM encourage them to do so. The more MPs that sign the EDM the greater prominence it receives.
Yorkshire Building Society is one of the largest building societies in the UK. We offer a range of financial products and services including: savings & investment accounts, insurance products, loans, mortgages and more.
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Yorkshire Building Society is authorised and regulated by the Financial Services Authority (FSA).