HL Deb 17 March 1981 vol 418 cc651-2
Lord Redesdale

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what progress has been made in the discussions between the Building Societies Association and the Chief Registrar of Friendly Societies about the establishment of a comprehensive deposit protection scheme under Section 43 of the Building Societies Act 1962.

The Minister of State, Treasury (Lord Cockfield)

My Lords, in the course of lengthy discussions it became apparent that societies were unlikely to be able to introduce a scheme on a basis which would be acceptable to all of them. Accordingly, the introduction of a statutory scheme has been noted as a matter to be considered when the opportunity next arises for building society legislation. While the Building Societies Association has never formally committed itself to guaranteeing that no investor in a building society would ever suffer loss, the association is confident that, in the event of difficulties arising in a particular society, there would be a similar constructive response from other societies in the future, as there has been in the past.

Lord Redesdale

My Lords, I thank my noble friend for his most full and clear explanation. Would he be good enough to state whether he would consider deferring the depositors' protection scheme under the Banking Act until a scheme is worked out that is satisfactory to the building societies?

Lord Cockfield

My Lords, with respect to my noble friend, that is quite a different question. The Banking Act 1979, which was discussed at length in your Lordships' House, provides for the setting up of a statutory scheme for the protection of banking deposits. It is generally agreed that there should be a scheme in respect of building society deposits. We very much hoped that it would be possible to secure voluntary agreement to this. It has not been possible, and therefore we have noted the position for statutory action in due course. Meantime, the Building Societies Association has adopted a resolution for the protection of depositors, the general effect of which I summarised in the latter part of my reply to my noble friend's original Question.

The Earl of Kinnoull

My Lords, will my noble friend advise the House whether any investor has lost any savings in any of the recent defections of building societies?

Lord Cockfield

My Lords, I am very happy to assure my noble friend that in recent years no member of the public depositing money with a building society has in fact suffered any loss as a result.

Lord Davies of Leek

My Lords, is the noble Lord aware that many laymen in not too affluent circumstances regard the building societies, by whatever name they may be called, as a fairly safe place for their savings, small or large? Would that be true?—because there have not been many defaults.

Lord Cockfield

My Lords, I entirely agree with the noble Lord, In fact, the record of the building society movement in this particular field has been admirable, and when difficulties have arisen the movement as a whole has been able to deal with them on a very satisfactory basis. The resolution that it has passed indicates that that position will continue.

Lord Redesdale

My Lords, will my noble friend also agree that the record of the banking industry is equally good and that only on one occasion since the Banking Act was passed has a depositor lost money through a bank?—and this came up in the discussions on the Banking Bill. Will he not agree that if the principle should be on a statutory basis for banks, it should also be statutory for building societies?

Lord Cockfield

My Lords, I do not think that any of us disagrees with the general drift of my noble friend's supplementary question. It is very important that depositors, whether with banks or building societies, should be adequately protected. In the case of banks, appropriate provisions were included in the Banking Act 1979, and in view of present developments we have noted the position in relation to building societies in order to deal with it when building society legislation is next introduced.

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