Cumbrian building societies buck national trend - despite state-owned banks (From The Westmorland Gazette)

Cumbrian building societies buck national trend - despite state-owned banks

10:24am Thursday 4th February 2010 in

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BUILDING societies in Cumbria have claimed that part-nationalised banks have an unfair advantage in the financial markets.

At the height of the credit crunch in the Autumn of 2008, when the capitalist system itself looked under threat, people flocked to building societies with their savings as they were deemed to be safer havens than banks - particularly after the TV images of long queues of desperate people outside Northern Rock branches.

In November 08 The Westmorland Gazette reported that the Cumberland Building Society took in £35 million extra in deposits, the Furness BS took £10 million more and the Penrith BS took £1.3 million.

However, many building societies across the country have reported that customers have moved their cash elsewhere during the current financial year. The Building Societies Association have revealed £7.6 billion was withdrawn from the UKs 52 societies last year - though Cumbrian building societies appear to be bucking the trend.

Chris Hayward, chief executive of Penrith Building Society, said: “We could do with more mortgage business and we suffered with less mortgage balance in 09, but we had an inflow of funds over all in 09, though that has tailed off now and we are breaking even month on month.”

Chris McDonald, general manager at the Cumberland Building Society, said a strong rootedness in the community was helping the firm perform better.

“We have seen a significant inflow of money into our accounts this year,” he said. “The building society sector as a whole has seen a net outflow. We are other way round to that - we have seen money still flow into the Cumberland.

“I think this is due to a combination of things. It is down to building long-term relationships with customers, particularly through the branch network. We also deliver a high level of customer service.”

Both Mr Hayward and Mr McDonald both agreed that the building society network was seeing falling deposits because of the part-nationalisation of major high street banks like RBS and HBOS.

“They have an unfair advantage,” said Mr McDonald. “Because the state owned banks have an implicit guarentee that goes beyond the £50,000 guarentee on deposits (covered by a Government promise).”

Mr Hayward said: “Part of the reason why people put money in building societies was that we were seen as a safe haven. We still are but there is not the same guarentee that there is with state-owned banks.

“But most building societies are there for the long term benefit of customers, not for short term profit.”