Northern Rock crisis 'shows building societies safer'

27 September 2007

Recent troubles at Northern Rock have helped to underline the differences between banks and building societies, Britannia building society has said.

Problems caused by Northern Rock's use of the wholesale market to supply funds show that "building societies are the safer option" for UK banking customers, the firm claimed.

Britannia predicted a rise in the popularity of building societies as a result of the Northern Rock crisis last week.

According to the Building Societies Association (BSA), there are 59 building societies in the UK with total assets of over £310 billion, while around 15 million adults nationwide currently have building society saving accounts.

Furthermore, over two and a half million adults currently buy their own homes with the help of building society loans every year.

Emma Taynton-Young, a spokesperson for Britannia said the recent market has worked to "strengthen the difference between banks and building societies".

She explained that building societies are limited to how much they can borrow on the wholesale market to just 50 per cent, in accordance with the Building Societies Act of 1986 - making people more confident in the safety of their assets.

"The 50 per cent rule that the FSA imposed upon building societies and not banks, it actually makes us stronger," she added.

The BSA states that the average proportion of funds raised by building societies from the wholesale markets is 30 per cent.

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