Thursday, Jan 21, 2010
Their business model is broken
The Telegraph: Skipton finds doors are closed to them
The decision by the Skipton Building Society to increase its standard variable rate reflects the worsening situation for some mutuals.
They can't attract retail funds and wholesale markets are closed to them. The only way they can boost capital, as required by regulators, is to boost and retain earnings, which makes them uncompetitive.
Posted by devo @ 06:59 AM (979 views) Add Comment
10 Comments
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1. tenyearstogetmymoneyback said...
The thing is nobody except the Government can borrow at 0.5%.
If they were to offer an instant access account paying 3.0% they would have
no difficulty attracting new funds.
2. Steve said...
Paying the price for running a sustainable business model in a market where large-scale fraud is backed up by the taxpayer.
3. paul said...
I think the issue is that they can't afford to offer 3% - or that's what they're claiming at least.
There is a point to be made here about the different business models of building societies and demutualised/investment banks. Mutuals work an old fashioned retail model which while it doesn't rake in huge amounts has been very stable (notwithstanding the dodgy counting methods they use for measuring house prices gains).
Building societies have had to therefore shoulder a disproportionate levy in the form of the Financial Services Compensation Scheme and be subject to the capital ratios as their less careful neighbours. For this, I have a certain amount of sympathy. They were the prudent ones who were ridden by the reckless, all sponsored by and fully sanctioned by the current government.
4. Sarah said...
Paying the price for trying to run an honest business. There's no way they can compete with the fradusters backed by forced suckers.
5. Damien In Oz said...
In Australia the RBA cash rate is 3.75%. Ubank a subsidiary of NAB, one of the 4 Australian major Banks offers instant access accounts at 5.5%. One year term deposits from major Banks are between 6.0 to 6.3%, with 3 year deposits at 7% and 5 year deposits at 8%. Government inflation linked bonds offer a real yield of 2.75%.
What is clear in Oz is there is shortage of retail deposits and Bank's are having to pay up. Perhaps in the UK the major Banks are not really competing for retail deposits which results in savers getting such a poor deal.
6. timmy t said...
Paul - I agree the system is unfair. To be honest I'm surprised there hasn't been a bit more of a protest against the bigger banks by people voting with their feet and putting their savings in the Co-Op or somewhere similar.
7. stillthinking said...
I don't think that the eventual sacrificial closure of mutuals and others will be good for the market.
We are running out of competition !
8. mr g said...
Yet another example of prudence being sacrificed for greed and profligacy.
9. mr g said...
"Yet another example of prudence being sacrificed for greed and profligacy".
Sorry, that should have read: prudence being destroyed by greed and profligacy.
10. inbreda said...
so how do I put savings in an australian bank??