Newspaper article The Journal (Newcastle, England)

Building Societies Fighting Bank Levy

Newspaper article The Journal (Newcastle, England)

Building Societies Fighting Bank Levy

Article excerpt

Byline: Graeme King

NORTH building society bosses have attacked a Government scheme to look after the customers of failed banks which they say will hit their profits and force them to give a worse deal to their own customers.

The Financial Services Compensation Scheme (FSCS) was launched to ensure those who bank as customers of failed banks such as Bradford & Bingley are not left out of pocket - and it is funded by a levy on every financial institution in the country.

But building societies, led by the Newcastle and the Darlington in this region, say they are being discriminated against because the levy is calculated on the level of retail deposits they hold.

Building societies say the levy amounts to around 15% of their profits, where it would only add up to around 5% of the average bank's profits as banks rely more on borrowing and less on customer deposits. Societies fear it will cost them pounds 200m a year for the next three years and that they will eventually have to pass on the cost to their customers as they will not be able to afford to offer such good savings and mortgage deals. The Newcastle alone faces a pounds 4.3m bill this year.

An Early Day Motion has been drawn up asking for the Government to step in and reform the FSCS, and it has won backing from right across the country, including many North East MPs.

The Newcastle and Darlington building societies are backing the campaign, in alliance with the Building Societies Association which represents 55 societies nationwide.

The societies fear they will have to pay out even more should the FSCS require the repayment of capital borrowed to bail out the Bradford & Bingley, rather than just the interest on the loan, as is currently the case.

Colin Seccombe, chief executive of the Newcastle Building Society, said: "We have done all the good things that we should be doing, and now we are being penalised for that. …

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