For those worried about their building society surviving the bad times, the media is reporting that those in trouble might be given access to the asset-protection scheme which is backed by the government.

Although good news, this move actually signals the Treasury’s deep concern over the state of the building society sector. This is mainly down to the government regulator, the Financial Services Authority (FSA), forcing all financial institutions to get ready for an eventual 50% fall in house prices and an even worse commercial property downturn of 60%.

Those societies deemed unable to cope with such a nightmare scenario might be propped up by the asset-protection scheme, one that is currently being used to offer support for the Lloyds Banking Group and RBS.

The West Bromwich Building Society, already featured in this blog, is one of the institutions on the FSA watch list. It is thought that it is being asked to show it could weather a £100 million loss on its commercial property book. Such losses could mean a fifth of its capital could disappear; something that is worrying the FSA.

And with holes in their capital bases, building societies, along with other financial institutions, could be forced to look out for fresh money to shore-up their balance sheets. Unfortunately, going to the markets might not be an option, with the government having rocked confidence with a decision that saw the coupon payments of a number of Bradford & Bingley debt instruments being cancelled.

So with the money markets in no mood to risk money in an increasingly fluid situation, the government’s help might be needed.

Guest Article by Neil Camp

Tesco, never one to miss a bandwagon, will open 30 in-store bank outlets by the end of 2009.

This follows what the retail giant claims was a successful trial of an in-store Tesco bank outlet in a Scottish store which was originally opened in 2006.

A Tesco spokesman admitted that it was tapping into a growing resentment from people who see the traditional banks as being to blame for much of the financial troubles the world faces.

Three opened in April, 2009, with 30 more planned before the end of the year. The three stores involved in the first wave are Blackpool, Bristol and Coventry.

Of course, these are banking outlets and not banks in the true sense of the word. They will offer products from the store’s Tesco Personal Finance Division, which is responsible for the credit cards, insurance services and tescocompare.com, the price comparison website.

But the Tesco spokesman admitted that they were keen to offer current accounts within two years, making the Tesco bank a reality, rather than just an in-store facility.

And Tesco has already taken advantage of the troubles faced by its finance partner, the Royal Bank of Scotland, by acquiring its 50% share of their joint venture Tesco Personal Finance. It cost Tesco £950 million, but it’s doubtful, given the RBS’s troubled state, that it paid top dollar to take control of the venture.

City scribblers see Tesco’s continual move into the banking sector as a smart move and also a well timed one. They predict that retail banking will be a high margin business for the next few years at least, as people wake up to paying for their banking services and the bigger banks try to rebuild their balance sheets.

Mind you, it’s doubtful that when customers are withdrawing their hard earnt cash from an ATM, they’ll be getting many two-for-one offers.

Guest Article by Neil Camp