Manchester Building Society savers should check balance is below £75k
Manchester Building Society is in discussions with the financial regulator to secure its long- term future, as losses of £4.9 million in 2015 have created “uncertainty” for its 18,000 depositors.
The building society has stopped lending money to new customers, and is generating its income from existing loans.
Manchester Building Society’s audited reports have been prepared as a going concern, meaning the auditor is confident that the business will continue to operate for the foreseeable future.
Moneywise is not suggesting that savers need to worry. But you should be aware that building societies, unlike banks, are mutually owned by their depositors. Ultimately, it is savers’ money that is at risk if a building society goes under.
It’s always prudent to ensure you only have up to £75,000 in any one licensed financial institution.
This is how much you’re protected for under the Financial Services Compensation Scheme (FSCS) if something were to happen to your bank, building society or credit union.
Couples can pool their protection in a joint account, meaning balances up to £150,000 are protected.
Sue Hannums, director of savings advice site SavingsChampion.co.uk says: “Where possible savers should stick within the FSCS limit, or equivalent [in other European countries] for piece of mind. That goes for any bank or building society.”
The building society’s longer-term success is dependent on a return to lending, to increase its profitability and balance sheet.
It’s worth checking how competitive your savings are with Moneywise’s best savings rates.
David Harding, chairman of the Manchester Building Society says: “The Group continues to operate profitably on an underlying basis. However, as a consequence of the further reduction in the size of the business, the overall result for the year is a loss because we have written down the carrying value of our head office property and the deferred tax asset.
“Although there is uncertainty regarding the long-term future of the Society, we continue to put the best interests of our members first. The Board is developing a number of options which individually or in combination are reasonably expected to secure the future of the Society, to enable it to continue to meet capital requirements and to improve the quality of its regulatory capital.”
The Financial Services Compensation Scheme is the compensation fund of last resort for customers of authorised financial services firms. If a firm becomes insolvent or ceases trading, the FSCS may be able to pay compensation to its customers. Limits apply to how much compensation the FSCS is able to pay, and those limits vary between different types of financial products. However, to qualify for compensation, the firm you were dealing with must be authorised by the Financial Services Authority (FSA).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.