How secure are building societies?

Desk

Obviously, the downgrading of Santander has raised questions about the security of banks both internationally and in Britain.

However, I was wondering how building societies in the UK are placed to weather any global financial storms. Are they as exposed as banks, and if not then are they a more secure option for savings?

Desk

opinions4u

If you're under the £85k FSCS limit stop worrying.

There's no way of answering your question. I know no more than you about the liquidity issues surrounding any bank or building society.

I there were specific issues in one firm they would not be shouting it out.

Some building societies are less secure than some banks. And vice versa. We just don't know which ones.

Glen_Clark

Nobody has lost any money in any British Building Society for at least 100 years. Their assets are in Bricks and Mortar, and the Government will do everything it can to maintain house prices.

srcandas

Certainly BS deposits are a lot safer than you taking the money out and storing it under your bed

Desk if you are worried at all then spread it around. Open a few accounts. I have my pension in 4 PPs. I don't have any concerns about any of the companies but it just settles any illogical thoughts I might have and I can get on with my life

Desk

I hear what's being said, and understand the assurances provided by the FSCS.

However, this very site notes that FSCS has a capacity of £4 billion, which in itself would only be enough to cover the UK's 25th biggest deposit taker. If major banks or building societies were to start toppling I can't see how the FSCS and the government could cover those scale of losses.

I can remember hearing about people who had lived through the Wall Street Crash, had lost their entire life savings, and pledged to never trust a bank again. This led to discoveries of hidden cash during house clearances in the 1970s/80s.

I'd hate to find myself in a similar position to those poor souls, but am struggling to think up a safe option for my savings. Security is paramount over a decent interest rate at present, but presumably a bank safety deposit box is no more secure than a savings account if it were to go under?

And I don't want to tie up my cash in real estate, particularly if there is a crash and the values plummet (as in Ireland). NS&I isn't even maybe that secure an option, if GB ends up like Greece (heaven forbid).

Any other ideas?

Desk

Reaper

I think you are worrying needlessly. Holding cash in a box is a bad idea as inflation just eats away at it.

There is always gold if you are really that spooked, but it is not a topic that MSE allows us to discuss as past discussions rather lost touch with reality.

thenudeone

There is always some risk.

Cash can get stolen, destroyed by fire or flood, as well as losing its purchasing value due to inflation.

The risk of you house burning down are, IMO, many times greater than the risk that the FSCS will have in sufficient funds AND the UK government also has insufficient funds to lend to the FSCS to cover its liabilities.

Buying a physical asset might avoid the risk of bank failure but the asset itself could be stolen, damaged, or gradually deteriorate (eg property). Insurance won't cover these risks if you think the entire financial industry will be unable to meet its obligations.

There are no magic bullets, unfortunately.

Glen_Clark

Desk wrote: »

I don't want to tie up my cash in real estate, particularly if there is a crash and the values plummet (as in Ireland).

There won't be, because unlike the countries that have experienced a property price crash, Britain has maintained very strong restrictions on the housing supply.
Even Government schemes under the guise of making homes more affordable will increase prices, because they just throw more money at the same limited supply.
At the same time the increasing gap between rich and poor increases the demand for multiple homes.
The demand for housing is increasing more than the supply, and so prices can only go one way.

PS: The morality of restricting housing supply by designating 'green belts' 'national park' 'wild bird habitat' 'historic interest' or whatever else they can come up with is one thing. These things are nice to have, but are they more important than EVERYONE having a decent home?
In any case, moral issues aside, its certainly Great for property investors.

grey_gym_sock

i think building societies are less likely than banks to have taken on ridiculous risks, or to be filing misleading accounts to conceal their losses.

OTOH, it is less certain than it used to be that any small building society that gets into financial trouble would be bailed out by a bigger one, because there are few big building societies left to do that, now that most of them have become banks. and big building societies have to put their own financial stability first.

but basically, either stick to 85k per institution, or stick to the too-big-to-fail institutions (Nationwide BS, and the 5 big banks), or both.

opinions4u

Desk wrote: »

I hear what's being said, and understand the assurances provided by the FSCS.

However, this very site notes that FSCS has a capacity of £4 billion, which in itself would only be enough to cover the UK's 25th biggest deposit taker. If major banks or building societies were to start toppling I can't see how the FSCS and the government could cover those scale of losses.

They do what they did when the FSCS paid out £14bn to keep Bradford & Bingley savings account alive. The Treasury can effectively print the money needed.

I'd hate to find myself in a similar position to those poor souls, but am struggling to think up a safe option for my savings. Security is paramount over a decent interest rate at present, but presumably a bank safety deposit box is no more secure than a savings account if it were to go under?

The ownership of the contents of the box remains with you. Access may be an interesting thing though.

If you put bank notes in it they will erode in value. Pointless thing to do.

And I don't want to tie up my cash in real estate, particularly if there is a crash and the values plummet (as in Ireland). NS&I isn't even maybe that secure an option, if GB ends up like Greece (heaven forbid).

Any other ideas?

Desk

If you really think the worst is going to happen a decent gun, ammunition, fresh water supply and several tins of beans would be a starting point.