NORWICH and Peterborough Building Society– with branches across Fenland- today rebuffed claims they face a potentially ruinous compensation bill over an investment firm collapse, insisting there are sufficient funds to withstand even the “worst-case scenario”.

The building society is considering an appeal against a Financial Ombudsman Service (FOS) judgment that it should repay one elderly couple �28,000 after a preliminary ruling that it mis-sold bonds in collapsed investment firm Keydata.

If upheld, the ruling could spark a raft of claims from 3,500 customers who fear they have lost life savings ranging from �5,000 to �100,000 and believe N&P advisers did not fully explain the risks associated with the funds.

Many of these investors, mostly pensioners, have already submitted complaints or are waiting to hear whether the Financial Services Compensation Scheme (FSCS) will cover their losses before pursuing their cases further.

Reports over the weekend suggested that if the 135-year-old society was forced to pay out at a similar level to all of those involved, it could face a bill of �50 million.

Such a bill would dwarf the N&P’s annual profits which last year stood at �1.3 million before tax, down from �5.9 million the previous year. The N&P has 46 branches across East Anglia and Lincolnshire and employs more than 800 people.

But chief executive Matthew Bullock moved to reassure staff and customers, pointing out that the building society had reserves of �203 million at the end of last year.

“The board has looked at every possible scenario and we are sure that whatever the outcome, we can absorb any losses without it crippling the company,” he said.

While it is possible N&P advisors will be judged to have mis-sold products in some cases, Mr Bullock remains confident that this is unlikely to be true in all 3,500 cases.

He said: “We have been very clear all along: we will meet our obligations in any case in which we are judged to have got it wrong.”

Mr Bullock added: “While I do not want to minimise the anguish of the customers caught up in this, it is important to remember that they are 3,500 out of 15,000 financial advice service customers and 500,000 savers in total.

“I can reassure the 99 per cent of customers who do not have savings in Keydata products that their money is safe.

“We are very conscious of the damage this has done to our reputation. We went well beyond the bare minimum expected in terms of due diligence; the product itself was sound, the problem was with the way it was managed by Keydata.”

There are a number of ways in which investors, who moved funds into Keydata on the advice of N&P financial advisors, could be refunded. Their savings are currently in limbo as the Serious Fraud Office investigates Keydata’s collapse and the FSCS and Financial Services Authority (FSA) consider whether investors are entitled to compensation.

The FSCS is expected to announce whether it will pay out up to �50,000 per customer next month. However, such a deal would not remove the pressure from the N&P as the FSCS could seek to reclaim the money if there is evidence of mis-selling.

If no compensation is forthcoming, the most likely route for customers would be a direct challenge to the N&P. One law firm, Regulatory Legal, is already pursuing the case on behalf of some 200 customers,

The FOS ruling concludes that in the case of one couple, the N&P “exposed their capital to an inappropriate level of risk”.

The ombudsman added: “I do not believe that (the customers) would have invested in this product had they been fully aware of the risks.”