Ex-Chelsea Building Society Chief Exec Takes Blame for Decline of Chelsea
December 2009 – Richard Hornbrook, former Chief Executive of Chelsea BS takes the blame for the society’s demise.
Thiismoney Report
OFT & Nationwide Building Society
December 2009 – Following the failure of its case against the Nationwide BS and seven banks, concerning unfair charges on unauthorised overdrafts, the Office of Fair Trading has decided not to pursue an appeal. The court’s decision that the charges are not assessable for fairness on the basis of cost seems a strange one.
Nationwide Building Society Report
“Mutual” Fat Cat Pledges Not to Take a Bonus
December 2009 – Iain Cornish Chief Exec of Yorkshire BS says “I won’t take a bonus now, even if I qualify for one, until you can see our members starting to feel less pain themselves”.
But annual reports show that other “mutual” fat cats still have their snouts in the trough.
Jeff Prestridge, Financial Mail Personal Editor says “It is time for greed to be eradicated from society boardrooms”.
Thiismoney Report
Skipton Building Society Sale
December 2009 – Skipton BS has sold off a subsidiary company Callcredit the third largest credit checking organisation in the UK. The sale is expected to boost Skipton’s profits in the order of £100million. There will be no windfall payments as the funds are needed to boost capital. The Skipton still has a large number of subsidiary companies including Connells estate agents.
Thiismoney Report
Yorkshire Building Society to Take Over Chelsea Building Society
December 2009 – The managements of Chelsea BS and Yorkshire BS are in the advanced stages of agreeing a merger. This will be subject to members’ approval but there is doubt about any windfalls to persuade members to agree.
Chelsea Building Societies coffers were severely weakened by a buy-to-let fraud and exposure to the banking collapse in Iceland helped the society to make a loss in its last financial year and in the first half of this year.
Walker Final Report – Corporate Governance
December 2009 – Sir David Walker has published his final report on a review of corporate governance of banks and other financial institutions.
Initially the remit for the review covered only banks, then other financial institutions including building societies were thrown in as an afterthought. Following which building societies were once again almost forgotten.
The report states: “There is, however, palpably no scope for complacency, and the extreme severity of the recent crisis and inadequate performance of many BOFI [banks and other financial institutions] boards, means that no opportunity for improvement, however radical, should be beyond the scope of this Review”.
That is strong stuff if only it was true – nevertheless once again the outcome is to only recommend further tinkering with the Combined Code. There is nothing radical about that as it is a routine practice. In fact it is difficult to find anything in the report that is likely to make the boards of building societies any more accountable and despite all the recent building society failures it is expected to be “business as usual in the boardrooms”.
Walker Report on Corporate Governance
Norwich & Peterborough Building Society
December 2009 – N & P is to close 10 branches including Chelmsford, Clacton and Colchester. The management say they are going to confine the society’s operations to their home territory although two of those to be closed are on their home territory.
Hanley Economic – Anger over Pay at AGM
December 2009 – A number of members expressed anger at the high and unwarranted pay increases that the directors continue to awarded themselves.
Thiismoney Report
Banking Code
November 2009 – The Banking Code has now been replaced by the FSA’s Banking Conduct of Business Sourcebook effective November 2009.
The Banking Code Standards Board has changed its name to the Lending Standards Board following the demise of the voluntary Banking Code.
Coventry Building Society
October 2009 – Coventry Building Society has secured £350 million in long term funding from the financial markets.
The 10 year bond, only the second to be issued successfully by a UK building society since the start of the credit crunch, was heavily oversubscribed by city investors.
In May 2009 chief executive David Stewart told the Daily Mail “We have no toxic mortgage assets and we don’t need capital injections”.
See Report Here
Building Societies Attack New FSA Proposals
September 2009 – The BSA has responded to the FSA consultation on plans to provide more protection for savers with a 19 page attack. The building societies claim a new rule book for the sector would adversely affect competition with banks.
The FSA’s proposals include a clamp down on societies offering high loan-to-value mortgages. The FSA also wants societies to have senior managers who are sufficiently skilled to oversee any riskier lending.
See Timesonline report. The Times also reports on rescue plans of Newcastle BS and Chelsea BS.
Swansea Building Society
August 2009 – Swansea BS is planning a “major expansion” for the coming 12 months, after revealing a 60% increase in profits.
The society claims that profits grew to £678,000 for the six months to the end of June, with total assets increasing by 23.2% to £163m over the same period.
See Report here
West Bromwich Building Society
August 2009 – West Bromwich BS meeting arranged for PIBS holders on 4th September for proposals to vary special conditions of issue of PIBS.
Chelsea Building Society
August 2009 – Chelsea BS suffered substantial losses mainly but not entirely due to fraud while the directors were busy at the trough – Chelsea Interim Accounts.
In a rather pathetic “Question & Answer” page those directors that have not suddenly departed say the Chelsea was not the only society to suffer fraud – so that’s alright then.
The Chelsea statement says: the fraud “is mainly as a result of the artificial inflation of property values by third party professionals involved in the transactions.” In theory, the society can go after these professionals and their governing bodies. Don’t hold your breath.
It will be interesting to see how much loot left along with the departing directors.
Stroud & Swindon Building Society
August 2009 – The sudden departure of Chief Executive David Hill looks ominous but no adverse reports have been issued by this society yet.
Watch this space!
West Bromwich Building Society
July 2009 – Those members of the West Bromwich BS attending the AGM were told that the board is seeking a new name for the “tainted” and “tarnished” society as part of a planned expansion into Birmingham city centre.
Why could they not have told everyone? Perhaps the name selected might well be the “Nationwide” or given the record golden handshake provided to the previous chief exec it could well be the Snouts in the Trough Building Society.
Unlike the change of status from “mutual” to “semi-mutual” any change of name will require the approval of the members of the society which is far more important.
Dunfermline Building Society
July 2009 – Scottish Affairs Committee concludes that the FSA failed to give adequate specific warnings to the Dunfermline Building Society prior to its collapse.
“Warnings need to be specific to the institution being addressed and must be given in terms that savers and investors can understand. The FSA should further ensure that the institution communicates these warnings to its members”.
“Whatever the shortcomings of the Tripartite Authorities’ communications with Dunfermline Building Society, it was the Board that had dug the hole in which the Society found itself”.
Walker Report on Corporate Governance
July 2009 – Sir David Walker presented 39 recommendations designed to improve the accountability of banking boards included among them are:
* board level risk committees to be chaired by a non-executive, with these to have the power to scrutinise and block big transactions.
* remuneration committees to have the power to scrutinise firm-wide pay, including that of high-paid staff not on the board.
* bonus schemes for all highly-paid executives to have a significant deferred element.
* publishing the pay levels of employees who are paid more than 75% of executive director median in bands and to be subject to FSA scrutiny.
* the pay of highly-paid executives to be subject to greater scrutiny.
* the chair of the remuneration committee to face re-election if the report receives less than 75% approval.
* non-executive directors to have regular awareness sessions and spend a minimum of 30 days on the job and to face tougher scrutiny under the FSA process.
* A new role of chief risk officer and a risk committee.
* Investors (institutional shareholders) to engage with companies more actively and sign up to principles with which they must either comply or explain why not.
After the failure of the Dunfermline Sir David’s remit was extended to include all financial institutions – nevertheless the last item above will exclude building society members as usual – although it might perhaps apply to PPDS holders.
The idea of spending a minimum of 30 days at the office must be a great one for some non-execs. Their immediate thoughts might well turn to thoughts of a massive increase in pay and designing paper aeroplanes to wile away the time.
Sir David will produce a final report in the autumn.
The consultation runs until 1 October – Click here if you wish to respond
Companies Remuneration Reports Bill
July 2009 – Lord Gavron tabled a bill in the House of Lords in June that would require directors to publish on the first page of the annual report of a company “the ratio between the total annual remuneration of the highest paid director or executive and the total annual average pay of the lowest 10% of the workforce”. The bill is currently working its way through Parliament. We wait to see if it survives.
West Bromwich Building Society
July 2009 – The West Bromwich annual financial report reveals that the former chief executive of the West Bromwich Building Society Stephen Karle received a golden handshake of more than half a million pounds plus a bonus and pension after his sudden departure.
This is contained in the fine print in the Summary Report which is the only report that all members receive prior to the AGM. The Annual Report, has only just been made available after the issue of ballot papers which contain a resolution requesting support for the Annual Report.
Following Stephen Karle’s departure the society had to take emergency action to survive including many redundancies and with the Government’s help changing its model from “mutual” to a new form “semi-mutual” with shareholders as well as members.
Birmingham Post Report for the full gravy train details
Citywire Money Report
West Bromwich Building Society investors consider legal action over change of benefits – Telegraph Report.
FSA Consultation
June 2009 – The Financial Services Authority (FSA) is consulting on additional guidance to ensure that building societies diversifying away from the traditional business model have the risk management systems and skills necessary to operate safely.
The FSA’s Consultation paper 09/16 is entitled ‘A Specialist Sourcebook for Building Societies: Enhanced supervisory guidance on financial and credit risk management’. It was published in June 2009 and the period for consultation responses closes on 5 September 2009.
For details of the consultation and questionnaire go to www.fsa.gov.uk/pages/Library/Policy/CP/2009/09_17.shtml
Nationwide Building Society AGM
June 2009 – As is their custom the Nationwide BS directors have once again awarded themselves massive pay increases.
The chairman’s annual pay went up to £250,000 from £187,000. Not bad for a few meetings per year. So you can get nearly two full-time Chancellors of the Exchequer for the price of one part-time Nationwide BS chairman.
The Chief Executive’s pay went up from a £575,000 to £650,000 per year and that is just basic pay. Sadly, for Graham Beale, his “Annual Bonus” suffered slightly so his overall total went down from £1,702,000 to £1,550,000 but his pay includes a 30% increase in “Pension Allowance” and a “Medium Term Bonus” increase of no less than 111%. So his overall total pay was a mere £1,550,000 for running a building society.
Nationwide employees certainly do well.
Meanwhile savers at Nationwide can put their money into accounts such as the “FlexAccount” that pays as much as 0% (yes nothing).
It is also the custom for the Nationwide board to hold AGMs in Birmingham where far fewer members can be expected to attend than was the case when the meetings were held in London.
Alan Debenham continues to receive encouragement from members to stand again as a candidate for the Nationwide BS board at the 2010 AGM. This is of course not at all popular with the ‘co-opted’ members of the board.
However if you would like to support him and you are a qualifying member please click here for a nomination form. Then print and send the completed form to Alan Debenham.
Newcastle Building Society
June 2009 – Newcastle BS is reported to be holding further meetings with Skipton BS with a view to a rescue by the latter. Newcastle BS is still struggling to cope with the problems created by the collapse of Icelandic banks despite previous aid from Skipton BS.
Thisismoney Report
West Bromwich Building Society
June 2009 – The West Bromwich BS saved at last by the FSA despite Robert Sharpe’s denial of financial difficulties. Yet another scheme that excludes member involvement has been devised to save building societies from the poor performance of their board members.
West Bromwich Building Society The Age of Cross Dressing – The Guardian
West Bromwich Building Society
June 2009 – The West Bromwich BS continues to be a source of speculation as previously reported. See report from the Birmingham Post.
FSA
June 2009 – The FSA has announced that the period for the maximum of £50,000 of protected savings in merged building societies is to be extended until the end of 2010. This is effective where societies have retained the original name.
The European Union Deposit Guarantee Schemes Directive will introduce an EU-wide common deposit protection limit of €100,000 from 31 December 2010.
Click here for FSA report.
FSA
June 2009 – The FSA warned building societies that they were getting too deep into risky lending. Hector Sants, chief executive of the FSA at the BSA annual dinner said even though they were mutuals owned by their members, building societies should follow the combined code on corporate governance used by stockmarket-listed companies. This requires boards to undertake a “formal and rigorous” annual evaluation of directors.
Non-executive directors should take their noses out of the trough and scrutinise the performance of the management.
Guardian report
Nationwide Building Society
May 2009 – The Preliminary Results for 2009 show that profits have fallen by almost 70% over the previous year in part due to the FSCS payment which cost the group (including the recent takeovers) £258 million. Graham Beale (CEO) reiterated how unfair the scheme is on building societies.
Thisismoney Blog
Our Comment: See below.
Building Societies Association
May 2009 – “Careless Talk Costs Lives”.
The outgoing chair of the BSA, John Goodfellow, told the industry’s annual conference – “We’re a small village and we talk, but talk can be damaging”. He warned societies not to comment on the profitability of their peers in the current climate, given general anxiety over the stability of the sector and cited West Bromwich as an example where they had to deny rumours of financial troubles.
John Goodfellow also went on to say – “We need to reduce even further reliance on the wholesale markets – while still recognizing the benefits of a diversified funding base”.
Our Comment – Strange that until the collapse of Northern Rock the building societies industry was pressing the Government to introduce legislation to permit societies to increase the proportion of funding that could be obtained from wholesale sources i.e. the Butterfill Bill. See below.
The next chairman of the BSA is Graham Beale, Chief Executive of Nationwide Building Society.
Nationwide: Proud to be Indifferent
May 2009 – Lisa Bachelor in the Observer comments on the poor performance of this society for its members. Higher rates for mortgages and lower rates for savings.
Our Comment – Another good year for directors though!
Observer Report
West Bromwich Building Society
May 2009 – The future of West Bromwich BS has been subject to much speculation. There have been a number of reports of this society seeking refuge with Yorkshire BS and with Coventry BS through the FSA. West Bromwich has denied the rumours.
Report from West Bromwich BS.
Scarborough Building Society
March 2009 – The transfer of engagements of the Scarborough to the Skipton BS approved by the FSA at end March.
Dunfermline Building Society
March 2009 – Recently a number of building societies have fallen victim to the folly of deviating from good and prudent practices in conducting core business in trying to keep pace with banks and to boost boardroom bonuses. All societies have been fortunate so far because of the “mutual” industry sector practice of self preservation.
However the management of the Dunfermline BS have found themselves in a difficult situation not helped by excessive commercial loans and are looking for help from the Government. This follows on from compulsory staff redundancies last year, the sudden departure of their CEO and the refusal of the auditors to approve their delayed accounts.
From Dunfermline BS website:
Commercial success
“Our involvement in lending to the commercial property sector across the UK continued to grow in 2007. Commercial lending rose to £270m from £235m in 2006, and has now more than trebled over the last two years. This business, now recognised as a key player in the commercial property market in Scotland, contributes significantly to the Society through increased revenues and increased brand awareness. Commercial lending is underwritten with prudent and responsible underwriting criteria, and the lending is secured on quality property assets”.
All the usual white knights like the Nationwide, Britannia, Yorkshire and Skipton have their own problems and are still trying to digest mergers as well as mend their own damaged balances. Nationwide BS has already been downgraded by ratings agency Standard and Poors.
Thisismoney report
Scotsman report
The Independent
BSA and the FSCS
February 2009 – An early day motion has been tabled by Ann Cryer, Labour MP for Keighley, urging “the Government to introduce a more equitable scheme for funding the insurance deposits of failed banks”.
The motion stated “the disproportionate impact on building societies of the Financial Services Compensation Scheme (FSCS) levy [and] that the current allocation of the FSCS levy works to the detriment of building societies’ members”.
And goes on to state “Building societies’s share of the levy, approximately £200m per annum for the next three years is equivalent to about 15pc of the sector’s pre-tax profit for 2007-2008 and contrasts starkly with the banking sector, where the FSCS levy is typically well below 5pc.”
However, in response to a Parliamentary question Ian Pearson the Treasury Economic Secretary stated: “We consulted on the rules over a couple of years, and the scheme was introduced in April 2008. I remember that, at the time, the building societies said that they wanted to be in the same category as the banks for deciding the rate that they pay for their protected deposits. They might have changed their minds since, and they will want to take that up with the FSA as an independent regulator”.
Our Comment – This seems to support the suggestion that we made that the BSA should suggest that society members should write to their societies and complain about boardroom members who failed to protect society members’ funds.
Britannia Building Society and the Co-op
January 2009 – Following the introduction of new legislation (the Butterfill Bill) and the downgrading of Britannia BS it has now been confirmed that Britannia and Co-operative Financial Services (includes Co-operative Bank, Smile and Co-operative Insurance) are to merge. Britannia will become a subsidiary of the Co-operative group.
Our Comment – The announcement states – ”Customers will continue to share profits and have a say in running the business” (must be referring to the Co-op)! It has been decided who is getting the new jobs and who is leaving (and how much money they will all receive). At least, unlike other recent emergency mergers, this one is expected to be subject to a members’ vote.
BSA Calls on Society Members!
January 2009 – The BSA is actually suggesting that members of building societies should write to Alistair Darling and complain about the fact that societies are required to compensate failing banks through the Financial Services Compensation Scheme. See Channel 4 Report
Our Comment – It sounds like a nice piece of PR. Perhaps they should have thought about this situation before the small print in the scheme was agreed. Perhaps the BSA should suggest that society members should write to their societies and complain about boardroom members who failed to protect society members funds.
Newcastle Building Society Announces Staff Cuts
January 2009 – Following on from the branch closures announced in December the Newcastle BS has announced that 150 staff are to lose their jobs.
See BBC News Report.