Chelsea Building Society

jack_spratt_2

There is one thing many of the negative posters fail to mention is the fact that Chelsea is a mutual building society !! As long as the business model is a sound one there will be no problems .
With no stock market to answer to or share holders (except its customer base ) it will have no problems

cvd

This does not seem to have been widely reported but is on the Nationwide's web site about the £400bn package announced on Wednesday:

“We are pleased that these initiatives extend to the whole of the building society sector, in addition to eligible banks in the UK, as this provides a fair and equitable arrangement for all.”

Link:
http://www.nationwide.co.uk/popup/fsa.htm

So if necessary the Chelsea could issue a PIB which the government would then buy. Of course, the government would want something in return - like the dismissal of the current directors or a reduction in their salary. So I doubt if the Chelsea will make use of the facility.

But it does mean that it is now less likely that any building society will need to give up its independence if it falls into difficulty.

Bernard_Coleslaw

Surely £55million is, in the scheme of things, not big enough to cause them problems? After all, they have £14billion in assets! And in any case, have they actually lost anything yet?

I'm certainly not worried enough to start pulling my funds out - in any case, after the last few weeks I think a nice, boring building society is probably the best place to be putting my cash. :D

Seajays

I think the thing that it does highlight (and was mentioned on the BBC news recently), is the fact that institutions like Chelsea Building Society, and all those local authorities, charities etc., were still putting money into Icelandic banks, even though they must have access to far more comprehensive and detailed financial advice than the average personal saver on the street, (after all they were dealing with huge sums of money by comparison).

So when a number of people on here continue castigating individual savers for putting their money somewhere that they say was 'so obviously' going to fail, in reality, even the experts who are paid to know whether it was safe or not were clearly not overly concerned.

The average person just wanting to get the best safe return for their money would have seen all the 'best buy' tables etc., would have seen a bank based in the UK (which it was, although its parent company is Icelandic - no different to many of the other foreign owned UK high street banks), operated under the FSA rules, with compensation scheme guarantees etc. (and "AA" rating). It would certainly not have been an unreasonable decision to save with them, and definitely not "stupid" or "irresponsible" as I've seen some people state.

Hindsight is a wonderful thing, but you can't look back, pick out the few "bad" press articles about the Icelandic finance system and then try to say "look, you were all told", when in reality at that time those articles were by far the minority, or were in more specialised economics circles, and for most people wouldn't even have come on to the radar.

baby_boomer

Bernard_Coleslaw wrote: »

Surely £55million is, in the scheme of things, not big enough to cause them problems? After all, they have £14billion in assets!

That's simply not how it works. The failed banks had even larger assets.

It's a case of capital adequacy. The profits add to the capital reserves - which would be necessary if Chelsea has expanded its assets in 2008, otherwise its capital position is weakened.

I can think of more boring building societies than Chelsea if I wanted to move any Kaupthing Edge money.

mean_momma

baby_boomer wrote: »

.
if it gets into trouble Nationwide will buy its assets for £0 with FSA approval.

Yes and no doubt there will be no windfall either! They paid a mean little windfall for the Portman merger and nothing at all for the Cheshire takeover.

Baldur

mean_momma wrote: »

...nothing at all for the Cheshire takeover.

You forgot the Derbyshire.

Bernard_Coleslaw

baby_boomer wrote: »

That's simply not how it works. The failed banks had even larger assets.

Correct, but they (the failed banks) also had a whole bunch of other issues that caused them to fail. IIRC it was reliance on wholesale funding that did the most damage. I just don't see this happening to a typical building society.

It's a case of capital adequacy. The profits add to the capital reserves - which would be necessary if Chelsea has expanded its assets in 2008, otherwise its capital position is weakened.

You're right, I wasn't making myself clear. What I meant to say was that given the overall scale of the business I don't think this will prove to be significant. In a worst case scenario it might mean a one-off dip in capital, but I think they're reasonably well capitalised in any case. And let's not forget - a loss hasn't even been declared yet.

Mithos

Bernard_Coleslaw wrote: »

Correct, but they (the failed banks) also had a whole bunch of other issues that caused them to fail. IIRC it was reliance on wholesale funding that did the most damage. I just don't see this happening to a typical building society.

You're right, I wasn't making myself clear. What I meant to say was that given the overall scale of the business I don't think this will prove to be significant. In a worst case scenario it might mean a one-off dip in capital, but I think they're reasonably well capitalised in any case. And let's not forget - a loss hasn't even been declared yet.

Exactly, the money might still come back.

My dealings with Chelsea have always made me think they are extremely proud to be a mutual, and I really do think they would defend that status as much as possible.

Er, did give them a quick call this afternoon after reading some twisted reports in the papers and the call was answered straight away and the person sounded very relaxed and reassuring. Not taking out any money as still feel I'm in safe hands.

Incidentally their one year FIXED 6.60% bond is being withdrawn next week and a lower rate is coming out, so time to act if you want it still.

mean_momma

Mithos wrote: »

Exactly, the money might still come back.

My dealings with Chelsea have always made me think they are extremely proud to be a mutual, and I really do think they would defend that status as much as possible.

Well, I always had the feeling that they might well have ambitions go down the banking route, or at least expand. Must have picked this up from hints in the press.