N&P to pay Keydata victims £57m compensation

Norwich & Peterborough (N&P) has agreed to pay compensation directly to all customers it sold Keydata products totalling £57m, exceeding the building society's previous outside estimates for the bill.

N&P says it will write to the around 3,100 customers it sold Keydata products inviting applications for ex gratia payments in return for transfer of the investor's rights in and relating to the investment.

They will be compensated directly, without having to put their mis-selling cases to the Financial Ombudsman, a spokesperson says. However N&P has not publicly conceded it mis-sold Keydata investments.

Investors will be repaid their initial capital plus interest calculated on a basis similar to that used by FOS, at 1% above the Bank of England base rate.

Gareth Fatchett, partner at law firm Regulatory Legal which represents 500 N&P Keydata victims, says: "After battling with N&PBS for the last 9 months we are pleased to see that commonsense has finally prevailed.

"There is no doubt that our clients will feel vindicated. We are very pleased that our pressure in bringing the claims has forced N&PBS to come to the table."

At £57m, the compensation provision significantly exceeds earlier outside estimates of the cost to N&P of the Keydata debacle, and puts the building society in a dire financial position.

N&P CEO Matthew Bullock said last August the bill could "be as high as £50m".

The huge "exceptional" was announced in the building society's final results for 2010, published today.

N&P reports pre-tax profits before the Keydata provision are £5.1m, up from a £1.3m in 2009. However once the cost of compensation is taken into account this falls to an overal loss for the year £48.9m.

The society says its Core Tier 1 Ratio, as at 31 December 2010 and after taking account of the Keydata provision, was 13.7%, which satisfies its regulatory capital requirements.

N&P's huge annual loss puts it in a weak financial position to negotiate Yorkshire Building Society's takeover bid, which both societies confirmed late last week.

N&P, the FSCS and the FSA have jointly agreed the settlement, the building society says, adding it is in well advanced discussions with the FSA over the mechanics of the exercise.

Gordon Horsfield, chairman of N&P, says: "The society has been deeply concerned for its customers who have suffered following Keydata's failure and is very sorry for the hardship and anxiety that has occurred."