Building Societies - are they safe?

baby_boomer

They don't like it up 'em Mr. Mainwairing.

Huddersfield Examiner - Yorkshire Building Society "upset" by Moody's downgrade

Coventry Telegraph - Coventry BS still one of the best in the country

But please don't mention the silly lending splurge we just did at the top of the housing market and after other lenders had pulled in their horns .

And shhhhhhh.

Financial Advice - Can BSs survive the recession?

"....Scaremongering and inaccurate reports could cause significant damage to the short and medium term outlook for the sector and possibly the long-term stability of the building society movement in the UK."

So should we be having this discussion at all, when we already know the conclusion?

After all, Martin has had the first and the last word. £50K and under in UK building societies and you're safe as houses.

Sorry for the bad analogy

Paul_Herring

baby_boomer wrote: »

Financial Advice - Can BSs survive the recession?

"....Scaremongering and inaccurate reports could cause significant damage to the short and medium term outlook for the sector and possibly the long-term stability of the building society movement in the UK."

Ohhh.

Mr. Peston (and, subsequently other reporters,) reporting on Northern Rock is ringing bells here for some, clearly, obscure reason.

Media wrote:

$ENTITY on the verge of downfall, if inaccurately reported, and if readers assume the worst and withdraw all funds. !!! !!!one!!eleven!!11.

Apropos of nothing, I've not heard much from Mr. Peston recently - has he been sacked/demoted?

Trollfever

Dunfermline

Size 12th with £3.3bn in assets
Wholesale funding 25%
Average loan to value 33%. Our average LTV for new business is around the 75% mark
Arrears and repossessions Three to six months arrears are 0.46% of all mortgages, and over six months 0.43%. Properties in possession 0.12% of total
Solvency ratio 12.2% as of Dec 2002
Subprime exposure None
Message to members "We have an outstanding record for safety. The society is a financially robust, profitable and well-capitalised institution and has absolutely no exposure to subprime lending. Our arrears and provision levels are consistently below the industry averages."

http://www.guardian.co.uk/money/2008/oct/11/banks4


.

baby_boomer

baby_boomer wrote: »

Martin has had the first and the last word. £50K and under in UK building societies and you're safe as houses.

But not because they are strong.

Independent - Nemesis of the mutual sector

".....The Government had to pay Nationwide to take Dunfermline off the taxpayers' hands. Some of the others may not be so lucky. Virtually all of them were subjected to "stress testing" by the FSA when applying for the Government's credit-guarantee scheme. Dunfermline failed, but the rest of them seem to have passed, suggesting that the situation for the remaining tiddlers may not be quite as bad as the "whistle-blower" thinks.

Whatever. The bottom line is that the entire banking system only continues to exist courtesy of the taxpayer right now. The Government's implicit guarantee of bank deposits makes us all believe our money is safe, but if you want to know who is underwriting your account, just take a look in the mirror. It's you and me."

## - Well put. Except that it's taxpayers AND savers. The strain this puts on interest rates [because of the FSCS levy] will last for years.

stv1x

Paul_Herring wrote: »

I've not heard much from Mr. Peston recently - has he been sacked/demoted?

Taking a vacation by all accounts

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

Andrew64

Building societies got up to some pretty stupid things, it seems
:
http://www.guardian.co.uk/money/2009/apr/17/building-societies-risk

Building societies face awful truth about boom-time spending spree
Building societies snapped up high-risk mortgage packages in the boom years. Now the extent of their rashness is revealed, threatening the credibility of the whole sector

MarketRisk

i have some savings in the cambridge building society, but i've been googling in vain to find a credit rating and none appears on the society's website. does anybody know where we can obtain these ratings? the blurb from the society says it is risk averse and local, but i would like a rather more independent opinion. any pointers very welcome...

baby_boomer

Cambridge is pretty staid and really is a traditional building society. It doesn't have a rating because it doesn't raise money in the capital markets, and was less tempted to get involved in business it didn't understand. Therefore it has had a better year than many.

Financial Mail - Cambridge Cheer

"Who says the era of the small building society is over? The Cambridge has managed to turn a neat profit of £2.5m and add to its reserves in the worst financial market in human history. It has only needed to take one property into repossession...."

I'd say its capital & reserves were OK for its risk profile.

Which is not to say that it won't come under increasing pressures in the future as it hardly has economies of scale & its expenses are considerably higher than the larger societies.

Andrew64

I've just had a word with a friend who works in the finance dept of a County Council who is involved in deciding where to invest/save the Council's money. He tells me that the 3 big rating agencies don't rate building societies with assets of less than 2 Billion Pounds. Anyway, he can only get ratings for the bigger societies. CBS has assets of about 750 Million Pounds. There may be ratings out there, but not by Moody, Fitch or S&P. That could explain why you can't find anything!

baby_boomer

Sunday Times - Bank of England holds crisis talks with seven building societies

The Moody's downgrade is going to cost us more money - possibly.

"THE Bank of England is locked in talks with seven British building societies to renegotiate crisis funding measures introduced at the height of the credit crunch.

A slew of credit-rating downgrades for building societies last week threatens to breach the terms of the government’s Special Liquidity Scheme and force the societies to hand back cash to the Bank of England.

Such a move would reduce the amount of new lending they could make, dealing a blow to Whitehall plans to kick-start the housing market.

Chelsea, Yorkshire, Skipton, Coventry, Newcastle, Norwich & Peterborough and Principality are the societies affected. All have recently passed stress tests imposed by the Financial Services Authority (FSA) and are not considered in danger of collapse.

Nonetheless, they will now be charged more to use the emergency funding.

Chelsea has already breached the terms of the scheme, and could have to pay back some of the cash it has received from the Bank..."