Building societies v banks

maypole

Are Building Societies safer than banks? and has anyone any favourites to recommend please.

Aegis

Building societies and banks are both protected by the same level of compensation, i.e. up to £35000. Otherwise there's really very little fundamental difference between banks and building societies now, though I believe there are investment restrictions on building societies which may make them marginally safer at the cost of being a little less competetive for most products (there are some exceptions to this rule).

maypole

Thank you.

zzzLazyDaisy

Banks have shareholders, and so have to think about pleasing both their customers and their shareholders.

Building societies only have their members to think about.

Also, traditionally the money loaned by a BS on mortgages is raised from savings by their members, so they should not be hit as hard by the sub-prime debacle as banks, who have been lending to each other.

My personal favourite is Derbyshire for its current one year fix at 6.9%

engworldcup2018

Would you say the Derbyshire Building society is "safe" I wanted to take up their one year deal at 6.9%
Have they been mentioned as any potential trouble, takeovers etc.
Also would the one year bond be covered by compensation?
All this Northern Rock worries has me rather scared of investing in building societies can anyone reassure me

Ian_W

engworldcup2018 wrote: »

Would you say the Derbyshire Building society is "safe" I wanted to take up their one year deal at 6.9%
Yes, the first £35K is covered by the FSCS which is independent of the Derbyshire.
Have they been mentioned as any potential trouble, takeovers etc.
They can't be taken over as they're owned by their members and no trouble has been mentioned - see posts above.
Also would the one year bond be covered by compensation?
All deposits are up to £35,000 per person, £70K in a joint account - the "bond" is just a poncy word for a fixed term savings account.
All this Northern Rock worries has me rather scared of investing in building societies can anyone reassure me
NR aren't a Building Society, they're a bank - on that basis you should be more scared of where your money probably is right now! :eek: Assuming you keep it in the bank, rather than in a sock under the bed.

Hope that helps.

MattB_4

I was told today that the FSCS only covers up to £4bn of balances! That puts you at at a 'greater risk' potentially with some larger organisations. Nationwide has something in the order of £115bn of Savings balances (source: Portman and NBS 2006/07 reports). I can't remember how that breaks down on a customer level (not sure if i could tell you anyway!) but i'm sure you get the picture. This scheme works for smaller organisations, but not really for any of the big highstreet players. I'd personally be in favour of increasing how much it offers, but only as a reassurance to customers. I dont think it would actually do that much good. Prob just cost the biger players more money paying out!

On the subject of take overs I was once told by a director that a take over of a building society wasn't actually impossible, just very very difficult. Something you could tie up in courts for so long that nobody would bother.

melbury

MattB wrote: »

I was told today that the FSCS only covers up to £4bn of balances! That puts you at at a 'greater risk' potentially with some larger organisations. Nationwide has something in the order of £115bn of Savings balances (source: Portman and NBS 2006/07 reports). I can't remember how that breaks down on a customer level (not sure if i could tell you anyway!) but i'm sure you get the picture. This scheme works for smaller organisations, but not really for any of the big highstreet players. I'd personally be in favour of increasing how much it offers, but only as a reassurance to customers. I dont think it would actually do that much good. Prob just cost the biger players more money paying out!

On the subject of take overs I was once told by a director that a take over of a building society wasn't actually impossible, just very very difficult. Something you could tie up in courts for so long that nobody would bother.

OMG is that true???:eek: I thought as long as an organization was in the scheme, all savers were covered up to the first £35,000. That is REALLY worrying.

MattB_4

http://www.fscs.org.uk/industry/funding/levy_information/

Levy limits

There are limits to the amounts FSCS can levy in a financial year. For compensation payments the limits for each sub-scheme are:

• accepting deposits: no more than 0.3% of a participant firm's protected deposits, cumulative;
• insurance business: no more than 0.8% of a participant firm's net premium income on protected policies;
• designated investment business: the total levy must not exceed £400m;
• mortgage firms: no more than 0.8% of annual eligible income;
• general insurance intermediaries: no more than 0.8% of annual eligible income.

This is what i found very quickly.

MattB_4

Reading through it a bit I'm not sure what it is actually saying on the £4bn limit. Not even sure it relates to savings in fact!

Ian_W

It's all a bit academic though Matt - the question was,
is my money safe in the Derbyshire if it fails?
Now had the question been,
is my money safe in the Derbyshire if it and HBOS and HSBC and LloydsTSB all fail at once?
My answer would have been "dunno"!!!!
And there's the rub - you wait around a hundred and whatever years for a bank or building society to go bust - then like the buses, several turn up at once!
TBH you're talking financial Armageddon for one to go bump, I doubt your money would be worth anything anyway if that happened. :eek: