Nationwide unhappy with Compensation Scheme Contributions
The largest building society in the UK has said its profits have been slashed by an “unfair” amount of contribution required for a savings protection scheme.
Based on Pre-Tax figures from the last tax year, Nationwide Building Society profits were down 69% to £212 million.
Nationwide has said the £241m paid to the Financial Services Compensation Scheme (FSCS), used to cover savers for up to £50,000, was “illogical”.
Falling interest rates have also resulted in lower returns from mortgages, which were also squeezed by bad debt.
Nationwide talked of a number of knock on effects caused by these ‘bad debts’, which included a sharp increase in missed mortgage repayments, hitting £394 million.
But Nationwide has said that even after everything the recession has had to throw at it, it still remains strong.
Graham Beale – chief executive at Nationwide, said that the building society was the only major banking institution in the United Kingdom to refrain from raising capital or require aid through government bailout schemes.
“This reflects a combination of our naturally high capital and prudent lending practices which are the hallmark features of a strong building society,” he added.
Nationwide added that just 0.6% of its mortgage customers were more than 12 weeks in arrears – significantly less than the figure recorded by the Council of Mortgage Lenders industry – an average of 2.39 percent based on figures from 31 March.
Nationwide profits were also affected after the merging of the Portman, Cheshire and Derbyshire building societies.
But Nationwide was unhappy at how the contributions had been calculated by the FSCS.
“We regard the fact that the FSCS charge is not linked to the level of risk posed to the financial system by individual institutions, but instead is allocated by share of the retail savings market, as illogical and unfair, producing a disproportionate outcome for the low risk retail funded institutions, particularly building societies.” Mr Beale said.
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