News
Bob Walters with James Bawa (CEO) and Alan Frost (Chairman)
ON FRIDAY 1 May, Robert Walter MP (North Dorset) met with the Chief Executive and Chairman of Teachers Building Society, based in Wimborne, to hear their concerns over the unfair impact of the Financial Services Compensation Scheme (FSCS) Levy on building societies.
Having been contacted by Chief Executive James Bawa earlier this year to seek support for an Early Day Motion calling for the introduction of a more equitable compensation scheme, Bob Walter MP went to Teachers Building Society on Friday to hear first-hand about the impact of the Financial Services Compensation Scheme (FSCS) levy.
The levy, a result of the cost of funding the rescue of failed banks including Bradford and Bingley, is hitting mutuals such as Teachers Building Society harder than banks even though building societies have generally operated a far less risky approach to lending, and funding that lending.
Bob Walter agreed to support an Early Day Motion calling for the introduction of a more equitable compensation scheme, and his visit to Wimborne-based Teachers was an opportunity to hear in detail about the effect of the FSCS levy on the Society’s profits and future plans.
As a result of the actions of irresponsible banks, our nations’ building societies will have to pay around £200 million every year for the next three years (that’s equivalent to 15 per cent of the sector’s pre-tax profit for 2007-08). As a mutual organisation, all profits made by Teachers are reinvested for the benefit of members. But even though the building society reported a profit in 2008 - amid a very challenging economic environment – as a result of the FSCS Levy the profit made was greatly reduced, leading to members calling it ‘a tax on savers’ at their most recent AGM.
While savings accounts are available to everyone, Teachers Building Society specialises in providing a mortgage service dedicated to people working in education and consequently has been able to make reliable decisions about lending. The fact that the Society's prudent policies have resulted in a very low level of arrears when other lenders are experiencing big increases, and that it sources retail funds largely from local savers - as opposed to the more volatile wholesale money markets - makes the disproportionate cost of the FSCS levy all the more frustrating for chief executive James Bawa.
Bob shares James’ concerns about the negative impact this imbalance will have on building society members and their savers and borrowers, and believes that the Government should be investigating a more equitable way of distributing the burden of failed banks that doesn’t punish the responsible. That’s why Bob chose to support EDM 426’s call for the introduction of a more equitable scheme, a plea supported by 171 other Members of Parliament to date.
After his visit Bob said:
“My decision to support EDM 426 was fully reinforced by my visit to Teachers Building Society. I believe the FSCS Levy in its current format punishes ordinary savers and prudent building societies and their members in order to fill the vast hole dug by irresponsible banks”.
“This is unfair and sets a precedent in financial services that all must be penalised for the mistakes of a few. The banking sector must be properly regulated and that means in future ensuring banks are prepared to foot the bill for their own excesses”.
Chief Executive James Bawa said:
“We are all very grateful to Bob Walter for taking the time to visit and hear our concerns about this levy, which is extremely unfair on our members. Bob’s support of our campaign for a fairer scheme, which has unified the building society sector, is a real boost for us as we run our business in this very difficult climate”.
“The challenges currently facing smaller mutual organisations like us are big enough, and the FSCS levy puts even more pressure on our decision-making and has an adverse effect on the interest rates we are able to offer our savers and borrowers.”
Bob Walters with two long standing members of TBS staff
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