Nationwide take over of Virgin Money

TheBanker

ForumUser7 said:

If Nationwide and Virgin Money eventually share FSCS coverage, presumably members/customers would be allowed to break bonds early if this took them over the 85k limit? Not something that’ll affect me, but just curious.

Quite a few years ago, I worked for a bank that acquired another bank. We did a big excersise to identify any customers who had accounts with both, and wrote to them to highlight what this meant in terms of FSCS cover. Any customer who was affected was entitled to break fixed term accounts early and receive their funds back plus accrued interest (at the full rate, no reductions or penalties). 

We are a long way from Nationwide and Virgin Money merging FSCS cover (in fact, they can't while one is a bank anf the other a building society). But I imagine if they do, they will have to allow people to withdraw funds without penalty if they exceed the FSCS limit. 

WillPS

TheBanker said:

We are a long way from Nationwide and Virgin Money merging FSCS cover (in fact, they can't while one is a bank anf the other a building society). 

Why not? I understand there are reasons Clydesdale Bank plc might need to remain a bank, but I don't understand why Nationwide couldn't move part of or all of their savings book(s) from a banking subsidiary in to the parent building society's wrapper, notwithstanding the complication of the process you describe.

TheBanker

WillPS said:

TheBanker said:

We are a long way from Nationwide and Virgin Money merging FSCS cover (in fact, they can't while one is a bank anf the other a building society). 

Why not? I understand there are reasons Clydesdale Bank plc might need to remain a bank, but I don't understand why Nationwide couldn't move part of or all of their savings book(s) from a banking subsidiary in to the parent building society's wrapper, notwithstanding the complication of the process you describe.

You are right, they could move customers from one entity to the other. There is a legal process to do this, It involves making an application to the High Court using Part VII of the Financial Services and Markets Act. This would not be the same as Nationwide and Virgin sharing FSCS protection in the same way that, for example, Bank of Scotland and Halifax share their protection, although it would obviously have the same effect for any customer who was moved.

But if they did this, they would almost certainly have to offer any customer who would be detrimentally impacted in terms of FSCS cover the option of moving funds, waiving any penalties or loss of interest that would otherwise apply.

WillPS

TheBanker said:

WillPS said:

TheBanker said:

We are a long way from Nationwide and Virgin Money merging FSCS cover (in fact, they can't while one is a bank anf the other a building society). 

Why not? I understand there are reasons Clydesdale Bank plc might need to remain a bank, but I don't understand why Nationwide couldn't move part of or all of their savings book(s) from a banking subsidiary in to the parent building society's wrapper, notwithstanding the complication of the process you describe.

You are right, they could move customers from one entity to the other. There is a legal process to do this, It involves making an application to the High Court using Part VII of the Financial Services and Markets Act. This would not be the same as Nationwide and Virgin sharing FSCS protection in the same way that, for example, Bank of Scotland and Halifax share their protection, although it would obviously have the same effect for any customer who was moved.

But if they did this, they would almost certainly have to offer any customer who would be detrimentally impacted in terms of FSCS cover the option of moving funds, waiving any penalties or loss of interest that would otherwise apply.

Yes, that's what I'm thinking might end up happening with Current Accounts at least - they'll be advised that on x date they'll no longer be a customer of Clydesdale Bank plc [trading as Virgin Money] and instead will be a customer/member of Nationwide; and that they need to consider the impact of the FSCS protection now being combined with any deposits Nationwide already have.

In the case of Savings, it could be a case of no longer offering fixed term savings through Clydesdale Bank plc [trading as Virgin Money], leaving existing bonds 'where they are', encouraging customers to 'self move' to Nationwide upon maturity (with the same boilerplate FSCS limit warning flagged up each time) and then 3/5 years down the line once the last bonds have fully matured doing a mopping up exercise following a similar process. That'd mitigate the possible impact of 'mid fix FSCS coverage changes' considerably/completely.

(This is all speculation, obviously - we have no evidence that they will combine their current accounts and savings, just a working assumption on my part.)

pafpcg

There's been extensive discussion of last year's distribution from the previous year's "profits" of a flat-rate £100 to Nationwide members who met some specific criteria.  What I haven't seen in the discussion is Nationwide's explanation of the apparent arbitrary nature of the criteria, which based on my recollection was: the bulk of the profits was devoted to boosting saver rates/reducing mortgage rates to reward members who lent to or borrowed from Nationwide. However, Nationwide generated substantial profits from current account customers for whom it wasn't possible to reward via better interest rates - the best option appeared to be to give a flat-rate £100 to all the customers who had used their current accounts more than minimally.  It would seem that this message has not sunk in with a substantial number of Nationwide members.  Calling it "Fairer Shares", though, does seem to have been a poor choice of words.

pafpcg

Turning to the actual topic of this thread, I wonder if the proposed take-over of Clydesdale Bank PLC* has been initiated by Clydesdale seeking a saviour because it is facing bigger problems than it can cope with.
Readers of the MSE discussions about Virgin Money/Clydesdale elsewhere on MSE will be aware of the slowness of progress of the integration of the "old Virgin Money" products and systems (primarily savings) originating from Northern Rock with the banking systems from Clydesdale Bank & its sibling Yorkshire Bank.  I'm speculating that Clydesdale has finally realized that the costs of building any sort of integrated system is greater than any potential benefits - it's now looking around for a partner with the resources to assist and crucially is willing to buy-out the shareholders whilst the Clydesdale business still has some value. 
Take-over of Clydesdale by one of the High-Street banks probably wouldn't get regulatory approval but Nationwide might be a good match, and with the current Nationwide CEO being ex-Clydesdale, at least they'd get a sympathetic hearing! The other thought is that the Nationwide CEO would be well aware of Clydesdale's predicament and made the initial approach with the aim of getting it cheap and asset stripping it.

*  "Virgin Money" is a trading name of Clydesdale Bank PLC.  The "Virgin" branding is licenced from Virgin Enterprises.

Weakest_Link

This looks like a lot of nice fat bonuses for Ms Crosbie and much fatter pay packets for the fat cats in the Nationwide boardroom in the future and some crumbs for the members who already receive only just above average returns on their savings with this so-called mutual society.

Having previously gone through a very costly (for members) and failed attempt to try and keep up with the fintechs the answer is to buy a bank.

Virgin Money shareholders will be introduced to the dodgy, undemocratic and biased voting system used by the directors of this "modern mutual" (their term for bank).  The purpose of building societies was and still is the provision of mortgages but Nationwide directors say its purpose is "Banking".

WillPS

Weakest_Link said:

Virgin Money shareholders will be introduced to the dodgy, undemocratic and biased voting system used by the directors of this "modern mutual" (their term for bank).  The purpose of building societies was and still is the provision of mortgages but Nationwide directors say its purpose is "Banking".

No, they won't. If the transaction proceeds they will be paid cash for their shares and will have no further part in the business - unless they happen to also be Nationwide members.

There's no stipulation preventing Nationwide or any other building society from offering whichever products they wish. They're not alone in having expanded their offer, although they are the only remaining player in the nationally-available current account market and I believe the only one to ever offer a credit card.

Nothing they are doing is in any way improper if that's your implication.

TheBanker

pafpcg said:

Turning to the actual topic of this thread, I wonder if the proposed take-over of Clydesdale Bank PLC* has been initiated by Clydesdale seeking a saviour because it is facing bigger problems than it can cope with.
Readers of the MSE discussions about Virgin Money/Clydesdale elsewhere on MSE will be aware of the slowness of progress of the integration of the "old Virgin Money" products and systems (primarily savings) originating from Northern Rock with the banking systems from Clydesdale Bank & its sibling Yorkshire Bank.  I'm speculating that Clydesdale has finally realized that the costs of building any sort of integrated system is greater than any potential benefits - it's now looking around for a partner with the resources to assist and crucially is willing to buy-out the shareholders whilst the Clydesdale business still has some value. 
Take-over of Clydesdale by one of the High-Street banks probably wouldn't get regulatory approval but Nationwide might be a good match, and with the current Nationwide CEO being ex-Clydesdale, at least they'd get a sympathetic hearing! The other thought is that the Nationwide CEO would be well aware of Clydesdale's predicament and made the initial approach with the aim of getting it cheap and asset stripping it.

*  "Virgin Money" is a trading name of Clydesdale Bank PLC.  The "Virgin" branding is licenced from Virgin Enterprises.

I think you're right - Clydesdale/Virgin have a hotch-potch of systems, nothing's properly integrated and doing so would be very expensive. I think Nationwide, whilst their systems are far from perfect, do at least have experience of integrating other Building Societies into their business. 

35har1old

TheBanker said:

ForumUser7 said:

If Nationwide and Virgin Money eventually share FSCS coverage, presumably members/customers would be allowed to break bonds early if this took them over the 85k limit? Not something that’ll affect me, but just curious.

Quite a few years ago, I worked for a bank that acquired another bank. We did a big excersise to identify any customers who had accounts with both, and wrote to them to highlight what this meant in terms of FSCS cover. Any customer who was affected was entitled to break fixed term accounts early and receive their funds back plus accrued interest (at the full rate, no reductions or penalties). 

We are a long way from Nationwide and Virgin Money merging FSCS cover (in fact, they can't while one is a bank anf the other a building society). But I imagine if they do, they will have to allow people to withdraw funds without penalty if they exceed the FSCS limit. 

Virgin couldn't manage to merge Virgin an Clydesdale Yorkshire as they still offer accounts on different platforms