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Compensation scheme hits Nationwide
By plrprousers | June 22, 2009
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.
According to Nationwide, these bad debts resulted in several repercussions, which included a significant increase in the number of missed mortgage repayments, hitting £394 million.
But Nationwide has said that in these recent turbulent times, it has remained strong.
Graham Beale, the chief executive at the building society, said that Nationwide was the only major financial institution in the UK to remain indipendant from government aid or the need to raise capital.
“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 said that only 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% 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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