Beverley Building Society Closure
December 2008 – This society is closing one of its two offices. The reason given for this is the unexpected costs incurred through their contribution to the compensation fund for Bradford & Bingley bank. See Hull & East Riding Report
West Bromwich Building Society Redundancies
December 2008 – 150 staff redundancies have been announced at this society. This follows the arrival of Robert Sharpe (ex Portman CEO) as CEO and downgrading by Fitch the grading agency. See Thisismoney Report
Our Comment – Does this mean a pay cut for Mr Sharpe or were these cuts needed to pay his bonus?
Newcastle Building Society Announces Capital Issue
December 2008 – Newcastle Building Society announced that it has boosted its capital through the issue of £10m of Permanent Interest Bearing Shares (PIBS). The issue was made due to expected write-offs resulting from its exposure to Icelandic banks. Newcastle BS is also closing some of its branch offices.
Treasury Discussion Forum
December 2008 – The Government’s Pre-Budget Report announced the establishment of a discussion forum, chaired by the Economic Secretary to the Treasury, to look at how banks and other financial institutions can work better in the interests of consumers and society as a whole.
Banking Code
December 2008 -The government is to put the banking code on a statutory footing. The FSA is currently consulting on proposals for a new framework to regulate the way that banks treat their customers and is seeking responses from customers of banks and building societies.
Click here – Regulating Retail Banking Code of Business Consultation. The deadline for responses is 16th February.
The legislation will strengthen the framework for protecting bank depositors and enhance financial stability through measures to reduce the likelihood of banks getting into difficulties.
The reforms of the banking system originate from the Treasury’s consultations on financial stability and depositor protection and recommendations made by the House of Commons Treasury Committee’s report on banking reform. The changes are likely to be embodied in the Banking Reform Bill, which will also provide the Bank of England, Treasury and Financial Services Authority with new powers to intervene in a banking crisis.
The Daily Mail reports: “The current voluntary code is seen as toothless. Marc Gander, founder of campaigning website consumeractiongroupco.uk, which has 200,000 registered members, most of whom are bank complainants, states the code is a sham. The idea of banks (and building societies) being fit to regulate themselves is laughable”.
Building Societies Fail to Pass on Base Rate Reduction
December 2008 – The World News reports – “Only four building societies have passed on the Bank of England’s surprise base rate cut to borrowers on variable rates. Click Here – World News Article
Skipton & Scarborough Building Societies
November 2008 – Despite stating that the two societies are financially strong they have announced that the Scarborough BS is to be taken over by the Skipton BS.
John Goodfellow – CE Skipton states “…….. By joining forces, these two societies will create a significant force in the building society sector – a modern mutual that is set to grow further in the years to come”. (Which makes one wonder why they did not do it before or is this a message for others and about how the Skipton will grow?).
There is no indication whatsoever in the Scarborough Annual Report that there are any problems that would require emergency action within such a short period of time. In fact it is claimed to be a record year for the society.
It is therefore strange that the Scarborough needs to be rescued so dramatically and once again members will be denied the opportunity to vote on the subject and will receive no windfall payments.
Perhaps too much of the Scarborough’s reserves were spent on a brand new bigger and better building for its headquarters which it moved into not long ago.
Both chief execs expect to be retiring on a nice pension pot at the end of the year.
Scarborough Announcement
Skipton Announcement
Yorkshire & Barnsley Building Societies
October 2008 – Barnsley BS has invested considerable sums of savers money in two Icelandic banks (Kaupthing Singer & Friedlander and Heritable Bank). Following the collapse of the banks Barnsley has had to seek the protection of the Yorkshire BS. The emergency takeover has been approved by the FSA. There will be no members’ vote, there will also be no windfalls unless the Yorkshire is able to recover funds from the banks at a later date.
The Yorkshire BS has announced that it has no exposure to Iceland banks.
Our Comment – You may be wise enough not to put your savings with a foreign bank so your building society geniuses do it for you.
Thisismoney report
Banking Times report
The Guardian
October 2008 – The Guardian newspaper says forget the banks and checks out the well-being of the building societies – click here
West Bromwich Building Society
October 2008 – Robert Sharpe the CEO of Portman BS who led the takeover of the Portman by the Nationwide is now to take over as CEO of the West Bromwich BS. The previous CEO was only in post for two years!
Our Comment: Another merger another sackful of cash for Robert perhaps? Sharpe gained a £2.8m payoff from Portman which would account for his enthusiasm for selling off the building society.
Some history on Mr Sharpe
Britannia Building Society
October 2008- Britannia BS is holding talks with the Co-op Bank with a view to a possible takeover by the Co-op (how about calling it the Co-operative Permanent Building Society?).
Skipton Building Society
October 2008- Skipton BS is in discussion with Chelsea BS on possible merger. The Skipton group’s main weak spot could be Connells their estate agencies.
Chelsea Building Society
October 2008 – Chelsea BS has been downgraded from C+ to C by Moody’s Investor Service because of asset value problems including high levels of exposure to non-standard mortgages. This was followed by the society’s announcement that it has £55m invested in Icelandic banks. However ratings agency Fitch has not made no change so far.
The Building Societies (Funding) and Mutual Societies (Transfers) Act 2007— A Consultation
September 2008 – The BSA has been lobbying Parliament for some time to amend legislation to allow building societies to borrow a greater proportion of funding through the wholesale market. The BSA’s lobbying is carried out through the All Party Parliamentary Group for Building Societies and has been presented by way of a Private Member’s Bill. This process was started long before the credit crunch began. Nevertheless revised legislation will enable building societies to have greater flexibility in their funding strategies (up to 75% from the wholesale market) and compete more effectively with banks in the future when all the bad times are forgotten once again and mistakes are repeated once again through poor governance.
The Treasury has launched a consultation on the amendments and this is open from 1 September to 27 October 2008. The consultation can be accessed via the Treasury website at www.hm-treasury.gov.uk/consult_building_societies.htm. Paper copies can be obtained from the HM Treasury Correspondence and Enquiry Unit by e-mail toceu.enquiries@hm-treasury.gov.uk or by telephone on 020 7270 4558.
Cheshire and Derbyshire Building Societies
September 2008 – It is very sad but it comes as no surprise that these two societies are to be gobbled up by the Nationwide. The Derbyshire BS annual report showed that the society needed to take drastic action. Approaches were made to the Cheshire BS in 2006 by the Portman BS when the Cheshire was experiencing troubles. These were rebuffed and the CEO of the Cheshire stated that the Cheshire intended to remain independent. Now it will in any case join with the Portman at the Nationwide BS.
These societies may have been too dependent on funding from wholesale financial markets and high risk mortgages. However the FSA has stepped in and is using its powers to effect the transfer of assets. It is reported that no members will receive windfalls nor will they be allowed to vote on the subject.
These events demonstrate the parlous state of the industry. When two societies of this size need to take shelter under the Nationwide’s wing and there are obvious concerns about the rest of the societies. The FSA has already warned building societies to consider how they would survive a prolonged credit squeeze. It said they were accumulating too much risk in buy-to-let mortgages and not preparing for “extreme stress scenarios.
Click here for FSA report on the merger process
Nationwide Building Society Voting Time
July 2008 – Nationwide BS even advertise the “Quick Vote” (which is a “Yes” vote for them) on the envelope! What will they do next? If only they could fill the forms in for you.
A big red arrow on the ballot paper shows members where to give away their vote to the fat cats.
They offer you the chance to win £1,000 if you vote. So vote “Against”.
They say your vote “does makes a difference”. Really? The only difference it will ever make is if you vote “Against”.
Their “Voting Guide” states “Strength in Numbers – Your Vote Keeps us Strong”. This is very true – the “Summary Financial Statement (SFS) shows that the fat cats areeven stronger – a massive 41% stronger for the execs. The chief executive receives far more as bonuses than his basic pay – 174%more! The non-execs pay figures are 19% stronger (includes their new recruits resulting from the Portman merger) and an increase of no less than 274% for the new chairman from £50,000 to £187,000 (a part-time job)! That is definitely “Strength in Numbers”.
The SFS states “… it is essential that we reward our top management fairly and in line with the market”. That is the kind of fairness that we would like to see for members. It is not a bank (at least in law) so the directors are not accountable to any shareholders and do not have the pressures of directors of banks but like to reward themselves in line with directors of banks.
Under the heading “Reward principles and decisions on pay” the SFS states “The rationale for setting salary/performance pay levels must be clear to our members” but needless to say does not spell out exactly how such pay levels and such massive pay increases have been justified.
The SFS states “As a “mutual” organisation, Nationwide is run for the benefit of its members”. Really?
Nationwide Building Society Voting Time
June 2008 – It will soon be “voting” time for the Nationwide BS.
Most members will be waiting with baited breath to learn how much more the directors paid themselves last year particularly following the takeover of Portman BS.
Unfortunately Alan Debenham, who has received a considerable proportion of the votes in previous elections, has decided not to stand as a candidate so the procedure will simply be a formality to conform to legal requirements. The directors will, no doubt, provide the usual undemocratic “quick vote” option that allows you to give all your votes to the chairman for the benefit of the directors.
If you have any queries you can contact Alan Debenham at alandebenham@hotmail.com.
Catholic and Chelsea Building Societies
June 2008 – The Catholic BS (UK’s second smallest building society with just one office) has announced that it is to be taken over by the Chelsea BS. This society has had a rather rapid turnover of chief executives in recent times but the current one will be the last and his action will solve the society’s problems. Click here to see full announcement.
Darlington – The Secret Building Society
May 2008 – Secrecy, apologies and embarrassment at the Darlington Building Society AGM.
Thisimoney Report by Richard Dyson
Review of Executive Pay
May 2008 – Following a demand from fund managers the Association of British Insurers is to carry out a review of bank executive pay structures. The Association states that their guidelines have always made it clear that bonuses should be aligned with shareholder returns. Unfortunately building society executives and non-executives are a law unto themselves and are not affected by this review. So members should not expect any change to the vast difference between boardroom pay and member benefits.
Skipton Building Society
April 2008 – Skipton BS continues to expand its empire with the purchase of Medical Care Direct, the Essex-based provider of self-pay hospital services. This will expand its Private Health Partnership division.
Banking Code
March 2008 – The latest edition of the Banking Code is now available. Make sure you ask for a copy from your building society.
Bank of England
January 2008 – Responsibility for collecting building societies’ statistical data has been transferred from the FSA to the Bank of England. This brings the statistical reporting of building societies in line with that of banks.
Banking Code
January 2008 – Many savers will have noticed the marked increase in the number of societies offering savings products with high introductory interest rates in the form of time limited bonuses after which the interest rate falls to a mediocre level without any further warning from the societies. Scarborough BS is just one such society that is renowned for accounts with introductory bonuses. In a press report the Nationwide BS management (the “consumers’ champion”) has called for a voluntary code of practice for fair play for consumers on savings products.
This appears to indicate that even the management of Nationwide BS, like consumers, has little faith in the Banking Code to which the Nationwide BS subscribes. The industry, has rejected the recommendation of the Banking Code Independent Reviewer that would address this problem.
The high introductory bonuses technique that societies use is not the only scheme that has recently seen an increase in popularity amongst building societies management.
The next edition of the Banking Code is due for distribution in March 2008.
Kent Reliance Building Society Fat Cats
January 2008 – The Kent Reliance BS reports that its Chief Executive received a pay rise of 35% last year with the rest of the executives gaining 38% over the previous year. The society states that it provides details of how boardroom bonuses are earned except that it does not.
The society provides members with the opportunity to vote against the pay increases but it is not binding and most members do not seem to mind such greed. It is a pity that members do not see such increases in savings interest rates.
Moneysavingexpert