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MP calls for return of Dunfermline’s FSCS levy

A Scottish MP has called on the Financial Services Compensation Scheme to repay the £7.2m levy it imposed on struggling Dunfermline Building Society.

Willie Rennie, Liberal Democrat MP for Dunfermline and West Fife, has appealed to the organisation amid reports that the society is on the brink of collapse.

As part of the FSCS, the society has to pay this amount to protect the first £50,000 of savings if banks collapse.

But Rennie believes the sum is unfair.

He said: “This is a huge sum for a society like Dunfermline. The FSCS levy penalises societies that are relatively safe.”

Rennie is adding his voice to a call from building societies arguing the size of the sums they pay to the FSCS should depend on turnover rather than volume of savings held.

A spokeswoman for the Building Societies Association said: “We can’t comment on this particular case but more generally, this issue is something we’ve been looking into for a while.

“We’d like to see an overhaul of the FSCS levy system so mu-tuals bear a fairer burden.”

Many societies’ annual results statements revealed losses, and the failures of Bradford & Bingley in the UK plus the huge disruption caused by the Icelandic banking crisis were widely blamed for this.

While societies fared better than banks, the FSCS levy had a detrimental effect on many financial institutions.

Norwich and Peterborough reported pre-tax profits of £5.9m. It says this figure would have been almost double that but £5.5m had to be subtracted for the FSCS levy. Last year N&P saw profits of £24.3m.

Meanwhile, Britannia’s pre-tax profits took a serious hit, falling from £114.6m in 2007 to £23.8m last year. While the society claimed the main reason for this was its exposure to Lehman Brothers and Kaupthing, it also had to pay a £19.8m levy to the FSCS.

Britannia claims that had it not been for these exceptional circumstances its profits would have been £100.4m.

Skipton also suffered due to exposure, this time to the Icelandic banking system.

It revealed pre-tax profits of £22.5m for 2008 – a fall from £163.9m in 2007. But the society also had to pay £16.3m for the FSCS levy and claims its 2008 profits are about half what they would have been had this not been required.

The news comes amid press reports that Dunfermline is seeking a government bailout after reporting a loss of £26m.

A message appeared on the society’s website shortly after the stories broke.

The message stated: “These articles are speculative. Our results are due out in the next two weeks and we will not comment on them until that time.

“Meanwhile, our focus remains on looking after our members. Thank you for your continued support.”

The society made a £2m profit in 2007 but it is understood that now the Financial Services Authority has been forced to step in to try and find a buyer. A number of mutuals are thought to have been approached but no deal has yet been done.

Dunfermline was unable to comment as Lending Strategy went to press.

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