MP backs compensation review (From Bournemouth Echo)

MP backs compensation review

Successful lobbying by a Dorset mutual will result in a review of the controversial compensation scheme for failed financial institutions.

LOBBY SUCCESS: James Bawa, chief executive, Bob Walter MP and Alan Frost, chairman

Teachers Building Society in Wimborne has had to contribute £374,000 to the Financial Services Compensation Scheme (FSCS), which is meeting compensation claims at five failed banks, including Bradford & Bingley and London Scottish Bank.

The fund protects savings of £50,000 for single account holders and £100,000 for joint account holders and Teachers chief executive James Bawa says his savers have lost out as a result of his society’s hefty contribution.

Bob Walter, MP for North Dorset, visited the Teachers offices to hear about the effect of the tax and he agreed to support an early day motion calling for the introduction of a more equitable compensation scheme.

Mr Bawa said: “The sooner the review is under way, the better. I hope they take a levy off everyone going forward for a future rainy day.

“Those institutions that are the biggest risk should pay the most. Building societies should not have to pay the biggest proportion.”

He added: “The levy in its current form is extremely unfair on our members.

“We were aggrieved because banks had sourced money from more risky wholesale markets and we hadn’t.

“At Teachers, we take a very prudent and responsible approach to lending and yet we are being asked to pay a disproportionate amount towards the cost of compensating customers of institutions that have followed a far less responsible path.”

Teachers sources 90 per cent of its money from traditional savers compared to the likes of Northern Rock, which prior to the banking crisis, sourced 85 per cent of its funds from more “precarious” wholesale markets, Mr Bawa said.

He anticipates another government plea for money when more customers default on mortgages at Bradford & Bingley, 55 per cent of which are buy to let, according to Mr Bawa, who added: “Teachers has had one repossession in 18 months – teachers do not default!”

Founded over 40 years ago by the National Union of Teachers, Teachers Building Society still provides mortgages for teachers while its savings products are available to everyone.