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B&B cost could be worse than MPs’ expenses

The Building Societies Association has warned that if the sale of B&B assets does not cover its debts, the cost to the industry could rival the MPs’ expense bill.

The Government and the FSCS took on a £14bn loan from the Bank of England to cover the B&B intervention. If the sale of the B&B assets does cover these debts, the next £1.84bn will fall to the banking sector.

Speaking at this year’s BSA conference in Harrogate last week, outgoing chairman John Goodfellow called on the Government to work with banks and building societies in its attempts to run off the rump of the B&B book.

He said: “It would be appalling if building societies were pla- ced at any sort of risk as a result of the failure of the authorities to realise the maximum amount from the B&B loanbook.

“The Government should clearly state now what it intends to do when such a shortfall arises. The potential cost to the members of all building societies is significantly larger than the fiasco of MPs’ allowances.”

FSCS chief executive Loretta Minghella assured delegates this would not be the case.

She said: “The Government is hopeful that it will recover the £14bn over the coming years and will closely monitor the situation for opportunities of asset sales.”
But Minghella warned against any “fire sale” reaction which would reduce the amount recovered from the bank.

If the B&B shortfall exceeds £1.84bn, a further £2.2bn will fall to the general retail pool, which will include IFAs and mortgage brokers.

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