Frustration at £1m payout to prop up failed banks

By Dan Santy Wednesday 05 December 2012 Updated: 10/12 16:04

Buy photos » Hinckley and Rugby chief executive Chris White is frustrated the building society is expecting to pass the £1m mark in money paid propping up failed banks. (s)

RUGBY's building society chief has told of his frustration at reaching the £1 million mark in money paid out to prop up failed banks.

Hinckley and Rugby Building Society has had to pay large sums to the Financial Services Compensation Scheme (FSCS), the safety net for customers of banks, insurers, credit unions, building societies and other providers.

Since the credit crunch hit, Hinckley and Rugby has to consistently hand over six figure sums from the profit it makes to save other institutions which have gone bust.

This money, it says, could otherwise be used to improve rates for savers and borrowers, and invest in growing Hinckley and Rugby.

The first payment, in October 2009, amounted to £239,000. A bill of £209,000 followed, and last year it handed over £172,000 to the FSCS. This year, Hinckley and Rugby paid out £175,000, and it is setting aside £242,000 to meet next year's bill.

Chief executive Chris White said: "To have had to pay more than a million pounds in just five years will be a rather unpleasant milestone to pass.

"And that is not the end of it – we anticipate the following year’s provision will be more than £360,000.

"Hinckley and Rugby is, of course, not alone in carrying this burden. All our fellow building societies are in the same boat."

Mr White added while the FSCS safety net for savers was essential, the burden of paying for it was falling with those institutions which posed little risk of collapsing.

"It is a challenge to make a profit in this era of ultra-low interest rates whilst being a cautious lender and paying affordable but attractive savings rates," he added.

"To see more than a million pounds of that walk out of the door to correct the errors of others is very frustrating.

"We – and by that I mean the organisation and the people who own it, our savers and borrowers – are paying dearly for those mistakes."