The way the FSCS is funded needs to be looked at, the industry group said today.
The Building Societies Association (BSA) has joined the attack on the levy savings account providers must pay to fund the industry compensation scheme.
Nationwide, the UK's largest building society, launched a stinging attack on the fee earlier this week - revealing that its profits had been pegged back by the £240 million it paid to the Financial Services Compensation Scheme (FSCS). The firm said that profits had slumped by 69 percent overall - and called for an overhaul of the system.
Currently, the FSCS covers savers in the event of their provider going bust for the first £50,000 of their deposits. It is funded by an industry-wide levy, proportions of which are paid according to market share - meaning that larger firms such as Nationwide must pay more.
The society's position, for which the BSA signalled support today, is that it should pay less because it ran a "prudent" business model - in contrast to smaller banks who have had to take emergency bailout money from the government over recent months due to the financial crisis. Nationwide's obligations have been raised along with those of other savings firms due to the instability, which has led to FSCS reserves needing to be bolstered in the event of more firms going under.
Adrian Coles, director- general of the BSA, said: "[The FSCS] is the fund that is bailing out the customers of Bradford & Bingley and the Icelandic banks that failed last autumn. The compensation scheme borrowed lots of money to bail out those savers and the interest on those borrowings are being paid by the banks and disproportionally by the building societies."
He added: "In a very competitive market where margins are low [and] where arrears are rising we really don't need that and I think that one of the issues we need to address going forward is how the compensation scheme is funded, because that is a big issue for societies at the moment."
