West Bromwich BS against the ropes?

by Gill Montia

Story link: West Bromwich BS against the ropes?

Reports that West Bromwich Building Society is in difficulties have appeared in the weekend press.

It is rumoured that the Financial Services Authority is seeking a bidder for the160-year-old mutual, which was among nine building societies to have their financial strength ratings downgraded by Moody’s last month.

West Bromwich’s buy-to-let loans and losses on financial assets that it has purchased are reported to be at the root of its problems.

Coventry and Yorkshire building societies have been mentioned in connection with a rescue.

Since the onset of the financial crisis, the UK’s building societies have been seen as a safe haven for savers’ cash and the sector has been extolling its conservative lending policies and complaining about the injustice of increased levies payable to the Financial Services Compensation Scheme because of the reckless action of banks.

However, some societies have exposures they would prefer not to talk about.

In the case of Dunfermline, which was hurriedly taken over by Nationwide at the end of March, the taxpayer had to pick up around £1 billion of risky debts and assets to enable to deal.

Societies could also be coming under pressure in the months ahead, as local authorities withdraw deposits.

Since the collapse of the Icelandic banking system, public bodies have been paying close attention to credit ratings; the downgrades by Moody’s has already prompted Westminster, Haringey, Dorset and Barnet councils to announce that they will be withdrawing cash lodged with certain building societies as soon as fixed-terms are up.