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Building societies play down Bank SLS ‘crisis’ talks

The building societies involved in this weekend’s reports suggesting the Moody’s downgrade has forced talks with the Bank of England have played down any rumours of a “crisis”.

Weekend reports in several of the national newspapers reported that some of the recently downgraded building societies have faced a weekend of “crisis talks” with the Bank of England with regard their involvement with the Special Liquidity Scheme.

Several mutuals, including Chelsea, Yorkshire, Skipton and Norwich & Peterborough were reported to have met with Bank officials to discuss possible breaches to SLS terms.

The SLS demands AAA covered bonds, which are entered into the scheme in return for gilts, but since last week’s downgrade by Moody’s some of the mutuals’ lodged bonds are now in breach of requirements.

Chelsea has confirmed that it has been talking to the bank. It could not comment on the specific details being discussed, but says there is no crisis.

A spokeswoman says: “As a result of the downgrade we have had to discuss with the Bank of England the impact on our eligibility for the SLS. This might mean administrative changes, it might mean alternative plans with the Bank, we are just talking through all the options.”

Skipton says: “We are working with Moody’s to ensure the structure of our programme ensures we maintain the highest rating. As a matter of good practice we are keeping the Bank of England informed.”

An N&P spokeswoman says the closest the building society has come to “crisis talks” is a letter to the Bank of England. She says: “We have sent one correspondence to the Bank, discussing various options which could include paying back our covered bond or even just amending the terms.”

She says N&P will continue to look for long-term cheap funding regardless of the downgrade, which may include entering into the Treasury’s Credit Guarantee Scheme.

Yorkshire denied it has been in any talks with the Bank, contrary to the reports.


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Action and reaction

Over the last month there has been significant disruption to plans and it has been interesting to see the reaction and outcomes to them.


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