There are some unhappy bunnies at Building Societies, at the moment. The Financial Services Compensation Scheme means that banks and building societies have to bail out depositors when one of the fellow banks and building societies goes bust. That’s what happened to Bradford and Bingley this weekend.
The government stepped in of course, and put its money into the pot, on the understanding it would be refunded in due course. But, its action came at a price. Our venerable financial institutions have to pay the government around £450 million a year in interest payments, and that has left our Building Societies hopping mad.
The BBC quoted Adrian Coles, director general of the Building Societies Association as saying, ”It is galling that those institutions that behaved prudently in the housing market upswing are now being called upon to pay some of the bills of those institutions that were far less prudent.”
It has been estimated that the UK’s 59 building societies will have to chip in £89 million a year, and they don’t think it is fair.
You can understand where they are coming from. Bradford and Bingley was irresponsible, why should those who played it safe lose out ?
But consider this. Bradford and Bingley failed because it backed the activity that stood at the centre of the UK’s own property bubble, the buy-to-let madness.
Where were the Building Societies warnings? Bradford and Bingley may have been the one to focus especially hard on this market, but warnings from banks and building Societies were virtually non existent. As such they are all slightly culpable for this disaster. And they should all pay a part of the price.
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