Prudent building societies such as the Pendle based Marsden are being forced to contribute to a levy to bale out banks which have recklessly gambled on the financial markets says local MP, Gordon Prentice.

The MP spoke out at Westminster today in support of his constituency next door neighbour, Keighley’s Ann Cryer. 

In a Commons motion, now supported by 159 MPs, the Keighley MP has called for changes to the Financial Services Compensation Scheme (FSCS) levy which hits building societies disproportionately hard. 

Speaking in the debate earlier today, the Pendle MP said: “The Marsden Building Society has been around since 1860 and has around 40,000 members. Because it is a mutual organisation, its profits are ploughed back into the business giving savers and borrowers a good deal. It is a long established and well run business serving Lancashire.” 

“But this levy, which comes out of pre tax profits, is squeezing the business. Around 15% of its profits are earmarked for the levy compared with 5% for banks who also must contribute.” 

The MP added: “This levy was designed before the meltdown in the financial markets and clearly must be looked at again.” 

“It is simply not acceptable for prudent and careful building societies to be funding the losses incurred by swashbuckling banks, taking high risks and making imprudent lending decisions.” 

Replying to the debate, the minister, Ian Pearson, said the Regulator, the Financial Services Authority, is to review the levy and how it affects different sections of the financial services industry – the banks, building societies, credit unions and so on. 

Note to Editors: Ann Cryer’s Commons Motion reads: 

FINANCIAL SERVICES COMPENSATION SCHEME LEVY ON BUILDING SOCIETIES13.01.2009 Cryer, Ann

That this House notes the disproportionate impact on building societies of the Financial Services Compensation Scheme (FSCS) levy, resulting from the failure of Bradford and Bingley plc, the Icelandic banks and London Scottish Bank; recognises that building societies' share of the levy, approximately £200 million per annum in each of the next three years, is equivalent to about 15 per cent. of the sector's pre-tax profit for 2007-08 financial year ends; notes that building societies' share of the levy for years beyond 2011 is uncertain, but could well be higher than £200 million per annum; acknowledges that the impact on building societies contrasts starkly with the banking sector, where the FSCS levy is typically well below five per cent. of pre-tax profits over a similar accounting period; further notes that the current allocation of the FSCS levy works to the detriment of building societies' members, their savers and borrowers; acknowledges that no building society has ever made a call on the FSCS or its predecessor schemes; and calls on the Government to introduce a more equitable scheme for funding the insurance of deposits of failed banks.