The FSCS’s recently published Plan and Budget for 2009/10 makes uncomfortable reading for Britain’s banks and building societies.
The FSCS which is funded by financial service providers, has announced that it will charge banks and building societies an extra levy, which could total over £1.1bn, to cover interest payments incurred following compensation paid to customers of failed banks.
While the existing levy applied across the industry will increase 42% from £131 million to £186 million, deposit-taking firms will also be asked to pay interest costs on loans used to fund last years’ bank defaults. This ‘special levy’ came to a sizeable £435 million last year, which the FSCS estimates will rise to £632 million for 2009/10.
This additional levy is used to cover the interest on loans used to compensate customers of Bradford and Bingley, Heritable Bank, Kaupthing Singer & Friedlander, Landsbanki Islands (Icesave) and London Scottish Bank. But many Building Societies feel they are being asked to contribute too much, leading the Building Societies Association to table an Early Day Motion last month which has attracted the signatures of over 100 MPs so far.
Currently contributions to the FSCS levy are calculated on the basis of the amount of money they hold in savings. Furthermore, as mutual building societies are funded by their savers this directly impacts customers.
Adrian Coles, director general of the Building Societies Association, told the Guardian: “It is particularly galling that we have to pay for the excesses of our wider banking colleagues. There’s no doubt that our members’ customers will be paying for this as the societies have to increase their margins.”
For more on the FSCS and how your savings are protected see our guide here.
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