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BSA says B&B failures could dwarf MPs expenses scandal

The Building Societies Association has warned that any shortfall from the deleveraging of the Bradford & Bingley mortgage book could create be a bigger fiasco than the MP expenses row.

Speaking at this year’s BSA Conference in Yorkshire, 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.

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 not meet the debt, the next £1.84bn will fall to the banking sector. Goodfellow says it would be “appalling” if this eventuality put the mutual sector at risk.

He said: “We need to ensure that the Government recognises the risk from a shortfall of collections from B&B and Iceland. It would be appalling if building societies were placed at any sort of risk as a result of the failure of the authorities to realise the maximum amount from the B&B loan book.

“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 MP’s allowances.”

IFAs are also concerned about this issue; if the 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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