In today’s Westminster Hall debate in Parliament, MPs urged the Government to reassess the “perverse levy” on UK building societies by the FSCS. But Hoban added that the issue of IFA levies needed to be looked at as well.
Hoban said: “The existing funding mechanisms on the financial sector are coming under particular strain, and not just on building societies. IFAs have concerns about how much they bear also.”
Hoban used the case of IFAs having to pick up the tab after the FSA shut down stockbroker Pacific Continental Securities. “Mutuals are not alone,” said Hoban.
The debate focused on the plight of the building societies, bought to ministers by Ann Cryer MP, who penned an Early Day Motion on the issue, which gained 158 MP signatures.
Cryer revealed that the Treasury Select Committee would be conducting a review into any FSCS inequalities.
Cryer said of the total 10 building societies that have posted their 2008 results this year, FSCS levies reduced profits by 75 per cent, from a possible £175m to just £34m.
She said: “The FSCS-driven onslaught comes at a particularly bad time when one looks at the bigger picture. Building societies are in many ways an antidote to the banking excesses of the past, a small corner of sanity. It makes no sense in kicking them, rather they need to be nurtured and encouraged.”
Cryer said, on average, mutuals are hit by levies equal to 15 per cent of their profits, while banks are only hit by 3 per cent of profits. Charlotte Atkins MP predicted that if the current trend continued, mutuals could be paying out £200m a year to the FSCS after 2009.
Gordon Prentice MP said “Building societies haven’t come cap in hand to the public purse in the way that the banks have. Now we are in the grotesque situation where risk-adverse building societies are funding, through this perverse levy, the losses made by banks and organisations that have failed through imprudent lending.”