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Building societies look to fill compensation gap

It has been revealed that 6 out of 10 building societies in the UK feel they will need to increase their mortgage rates and reduce savings rates to fill the gap left by their contribution to the financial services compensation scheme. This is a scheme set up by the financial regulators to ensure there is sufficient capital to compensate customers of failed UK banks although one which many feel has impacted more upon the building society sector than the general UK banking sector.

The system itself is based upon funds held by any one situation and does not take into account the general opinion that building societies have in the past been more secure than general UK banks. Whether the financial services authority will take this into account after numerous complaints by those in the building society sector remains to be seen as their main aim is to ensure there is sufficient capital to protect customers from failed banks.

While in general the building society sector has been particularly solid for many years, the Dunfermline Society recently collapsed and there are rumours of other societies in trouble. This in some ways undermines the argument of those in the building society sector and could weaken their claim for leniency in the longer term.

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