Building society profits protect against company insolvency, says BSA

Published on August 29, 2013 by Crawfords Accounting

The Building Societies Association has dismissed claims that its members are ‘profiteering’ in the current economic climate, instead claiming that they must hold on to an increasing amount of their accountholders’ money in order to protect against company insolvency.

Although building societies have historically had a fairly positive public perception, the BSA points out that they are not charities – and not all of their profits must be returned to accountholders.

Instead, at least some of it must be retained in order to protect against company insolvency, and so that the building society is capable of absorbing any losses that emerge.

The recent economic collapse has led to higher regulatory requirements on capital held in reserve, but the BSA adds that “many building societies already well exceed the minimum standards now demanded by the regulators”.

It also points out that, if losses were permitted to mount, a building society would face corporate insolvency just like any other profit-making company.

The observations are a timely reminder that further financial industry shocks are not out of the question – and of why adequate insolvency advice remains important to profit-making businesses in all sectors, as they try to balance their cash flow with their own client commitments.


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