Nationwide protests over FSCS bill
The Nationwide building society has issued a stark warning to the Financial Services Authority with regards to the £250 million bill the society has been hit with for its share of the Financial Services Compensation Scheme. The scheme is being put together to ensure that deposits up to £50,000 are guaranteed thereby giving some more backbone to the UK banking system. However, the Nationwide building society is arguing that the scheme is disadvantageous for low risk lenders such as building societies.
The £250 million bill which the Nationwide has been hit covers the next three years but the formula used to calculate a particular financial institutions share takes into account the size of funds held on deposit. However, quite rightly, the Nationwide is arguing that the vast majority of building societies are low risk lenders as they depend upon deposits in the main to cover their everyday business finance. Even though the regulations regarding building societies use of money markets have been reduced of late they offer nowhere near the same risk as the average UK bank.
Whether the Financial Services Authority will take the arguments of the Nationwide into account in the future remains to be seen but one thing is for sure, the overall cost of the compensation scheme is likely to be borne by banking customers in the UK.
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