West Brom Building Society In Trouble?

On the day when West Bromwich Albion were relegated from the Premier League*, there’s some more bad news for the Midlands town with the rumour that West Bromwich Building Society may be in trouble, and might have to be bought out by another building society – although these rumour have been denied by the company itself.

Coventry and Yorkshire building societies are both in talks with the regulator on a possible takeover of their struggling rival. If no deal can be agreed the worst parts of its loan book are likely to be nationalised, with its 47 branches and 530,000 customers passed to another society. The move follows stringent new stress tests being imposed on the sector by the FSA.

Whilst the West Brom is not exposed to as much bad debt as Dunfirmline Building Society was, there are some similarities between the companies, and the government is likely to want a similar resolution. In the Dunfirmline case, it was swallowed up by Nationwide, with the government taking on its bad debts.

Building societies have been under some scrutiny since the Dunfirmline takeover.

Whilst building societies have, on the whole, very “safe” business models, they’re currently finding times very tough. They rely on customers depositing vast sums of money with them for funding, but with interest rates being so exceptionally low, the general public is looking elsewhere to deposit their savings. There are also concerns that local authorities are withdrawing their money from building societies following the panning the authorities got after they got stung by the Icelandic banking collapse.

The West Brom has over half a million customers and 47 branches. As more news comes out we’ll try to post the most useful information here on Money Watch.

(* As a Wolves fan, this news gives me absolutely no joy at all. Oh no.)

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