Skipton Building Society has blamed the cost of compensating savers at failed banks for a steep drop in profits.
Profits at Skipton, the UK’s sixth largest building society, have also suffered from what it described as the worst housing market in living memory,
Skipton, which is set to merge with Scarborough Building Society on March 30 creating a top-five building society with around 860,000 members and £16 billion of assets, saw its pre-tax profits for 2008 dive by 86% to £22.5 million.
The group said its profits were nearly half what they would have been if it had not had to set aside £16.3 million to contribute to the Financial Services Compensation Scheme (FSCS) towards compensating savers following the collapse of Bradford & Bingley and the Icelandic banks.
It criticised the scheme, saying it was “unjust” that building societies that had “inherently safer” business models were bearing a disproportionate cost for the troubles of some banks that had “far riskier models”.
Which? personal finance campaigner Doug Taylor said ‘From a consumer’s perspective the important thing is that the industry pays for the compensation scheme. The various banks and building societies must find a way to agree on how contributions are divided fairly.’
But the problems in the financial markets did contribute to a 12.9% jump in Skipton’s savings balances, which provide 70% of the group’s funding, rising to £8.1 billion during the year.
The mutual credited the rise to a combination of consumers’ perception that building societies were a safe place for their savings, as well as its range of competitive products, particularly its branch-based accounts and limited edition fixed-rate bonds.
For more details about the FSCS and how it keeps your savings safe, see the Which? guide to .
© Press Association 2009
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