Your savings - Questions & Answers Many members are interested in what is happening in the wider economy and what that means to them and Stroud & Swindon Building Society. We have, therefore taken this opportunity to publish the most frequently asked questions and answers here.
With over 150 years’ experience of looking after your savings and mortgages, Stroud & Swindon Building Society is a financial services provider that you can trust. With some 250,000 members, Stroud & Swindon Building Society is the largest independent Society based in the South West and the 11th largest overall, with assets in excess of £3 billion.
Serving the needs of our members is our most important priority.
Many of you will be aware that the Financial Services Compensation Scheme (FSCS) has been triggered by the collapse of Bradford & Bingley and the Icelandic banks. You may not be aware that building societies in particular are bearing a heavy burden of the payments required into the FSCS. Building societies have argued that the scheme is unfair and disproportionate in its effect upon societies and a large number of MPs agree. This article from the Daily Telegraph highlights the issue very well.
MPs rally to Building Societies (
Daily Telegraph - 30th January 2009)
Politicians are calling on the Financial Services Authority to overhaul the UK's deposit protection scheme to ensure building societies do not bear a disproportionately large share of the £1bn annual bill. [
Read the full article on Telegraph.co.uk]
On 15th December 2008 the Debt Management Office (DMO) of HM Treasury issued an Institutional Certificate to the Stroud and Swindon Building Society confirming the Society’s eligibility under the 2008 Credit Guarantee Scheme. The Certificate of Eligibility was issued after satisfying itself that the Society fulfilled the appropriate Tier 1 Capital requirement set down by the Government for membership of the scheme and the Society was second after Nationwide Building Society to have this confirmation.
The guarantee provided by HM Treasury guarantees specified bank and building society debt instruments issued during the “Issuance Period” which ends on 31st December 2009. The guarantee is unconditional, irrevocable and ensures timely payment.
Why has West Bromwich Building Society raised capital using a new financial instrument?
All financial organisations need substantial capital to protect their customers' savings and provide security and indeed many of our high street banks have received capital support from the Government and, therefore, the taxpayer. Banks can also raise extra capital through rights issues but the mutual status of building societies means this route is not open to us. Recently, our regulator, the Financial Services Authority, reaffirmed the value of, and its commitment to, the mutual sector. The introduction of profit participating deferred shares (PPDS) is a practical demonstration of that commitment.
If I have savings or a Guaranteed Equity Bond with West Bromwich, are they at risk?
Savings with West Bromwich are protected by the FSCS for up to £50,000 per person or up to £100,000 for joint accounts. Guaranteed Equity Bond holders receive this protection too.
Who owns Stroud & Swindon Building Society?
Stroud & Swindon is not owned by any other organisation. It is a mutual building society owned by its members who hold mortgages or savings accounts.
As a mutual building society, we have no shareholders and this means that we do not have to pay any dividends to third party shareholders. This means we are able to pass on these benefits to you, our members.
Is Stroud & Swindon financially strong?
Yes, Stroud & Swindon is financially strong. Our reliance on wholesale funding remains low, with over 80% of our funding coming from individual savings customers we can ensure that we are not exposed.
Why did you report a loss in 2008?
The Society made an operating profit of £3.1m; it was only the impact of the Financial Services Compensation Scheme (FSCS) levy that pushed us into a loss making position. 2008 was the most turbulent in financial services history with many banks and building societies posting losses as margins were compressed by the competition for retail savings and the collapse of mortgage demand. However, our capital is very strong at over £160m so we could easily absorb this small loss.
Are the reasons for your loss one-off or are they ongoing?
We paid our full contribution to the FSCS last year. Clearly any further calls on the scheme will result in charges which we cannot predict at this time. However, the Society's capital base is very strong, even after absorbing this exceptional loss. The recent "downgrading" of the credit ratings of a number of larger societies has had an impact on the cost and availability of wholesale funding for all societies, even those such as Stroud & Swindon, which do not have a rating in their own right. This has led to increased competition for, and therefore increased costs of, retail funding. At the same time, historically low mortgage interest rates mean that the margins of all societies are being compressed.
Clearly we are doing all we can to address these ongoing challenges.
As you’ve made a loss, will you have to merge with another Society?
The Society is committed to remaining independent and has no need or plans to merge with another society.
Will you make staff cutbacks or redundancies?
The Society conducted a restructure in the second half of 2008 resulting in a number of redundancies. Clearly it wasn’t appropriate to continue to run the business with the same staffing level that we had when housing transactions were much higher. We also have a duty to our members to run the business as cost effectively as possible. Whilst it is impossible to rule out further changes given the dramatic events that have occurred, we have no plans in place to make any further redundancies.
Will you be closing any branches?
We have no plans to close any branches. Each branch of Stroud & Swindon is expected to make a positive contribution and this is monitored on an ongoing basis.
How will this impact on the members?
We will continue to offer our members the most competitive pricing we can. However, the effects of the FSCS levy together with the squeeze on our margins caused by the heightened cost of both retail and wholesale funding means that we have been unable to offer our members the returns we would have liked.
Are deposits safe with your Society?
Absolutely! The Society itself has a very strong capital position. In addition, all deposits with Stroud & Swindon Building Society are protected by the FSCS for up to £50,000 per person and for up to £100,000 for joint accounts.
For further information refer to the FSCS website at
http://www.fscs.org.uk/consumer/faqs/deposit_claims_faqs/
Does Stroud & Swindon have any exposure to Icelandic Banks?
No. Stroud & Swindon Building Society has made no such deposits with these institutions.