MPs are calling on the Financial Services Authority to overhaul the UK’s deposit protection scheme to ensure building societies do not bear a disproportionately large share of the £1bn annual bill.
Some 111 MPs have signed an early-day motion tabled by Ann Cryer, Labour MP for Keighley, urging 'the Government to introduce a more equitable scheme for funding the insurance deposits of failed banks'.
The size of the levy has become a big issue following the succession of bank failures last year, when the scheme was used to bail out UK and Icelandic banks. In total, the Government has lent the Financial Services Compensation Scheme almost £20bn.
Under the current structure, the size of the levy is calculated in relation to the size of a lender’s deposit base. As a result, building societies, which are largely deposit-funded, are frustrated at what they believe is a subsidy for the reckless practices of failed banks.