Nationwide saves Dunfermline
By politics.co.uk staff
Dunfermline Building Society is to be rescued by Nationwide, the Bank of England confirmed this morning.
After a weekend of speculation and efforts from the Treasury to secure a buyer before branches open this morning, it was announced Nationwide would buy the “core parts of Dunfermline”.
The UK’s largest building society will take on Dunfermline’s retail and wholesale deposits, the 34 branches, head office and some of the Scottish mutual’s residential mortgages.
A Bank of England statement read: “It is business as usual for all customers.
“Dunfermline’s deposit business will continue to operate normally. Branches and telephone banking will continue to open during their normal hours and customers can deposit and withdraw their money in the usual ways.
“Savers can be assured that their money is safe.”
Loan and mortgage customers should continue to contact Dunfermline in the usual way and should continue to make repayments as normal.
All of Dunfermline’s staff have already been transferred to Nationwide.
A statement on the Dunfermline website told customers: “Your money is safe. Savings accounts can be accessed in the usual way.”
The £50,000 protection of savings under the Financial Services Compensation Scheme remains – and if savers have money in both Nationwide and Dunfermline then they will have two slices of protection.
The Bank of England stated there was “no other option available” than the sale as recent losses risked savers deposits.
Dunfermline had hoped for a government bailout of between £60 million and £100 million but building society’s risky assets – including a £9 million loss in its own IT business – were expected to lead to a £26 million loss in total.
Dunfermline chairman Jim Faulds slammed moves from the Treasury over the weekend – as he tried to maintain the independence of the mutual.
“We’ve been in regular dialogue with the Financial Services Authority for six months now, but we are astounded by the behaviour of the Treasury, who haven’t spoken to us since last October,” he said.
The Treasury stated the move to spit up Dunfermline was necessary because of the scale of potential future losses and the society’s low levels of profits – standing at £2 million in 2007 on substantially larger assets.
“When considering the appropriate action to take, the Treasury took account of the scale of future losses faced by the society, the additional capital that would be required, and its very limited capacity to service new capital given its historically low level of profitability.
“It concluded that an injection of funds by the taxpayer would not be likely to provide value for money and would not provide a sustainable and lasting solution to the problems faced by the society.”
The Treasury statement added: “Today’s announcement also demonstrates the government’s support for the wider mutuals sector and the important role that mutuals play in communities throughout the country.”
Gordon Brown, speaking in Chile during his pre-G20 tour, said: “The savers will be protected. It is important to recognise that throughout this whole crisis everyone that has been saving in a UK institution has been protected, whenever there has been a difficulty in that institution.
“I repeat that it is our determination in restructuring the banks to make sure that people’s savings will be even safer in the years to come.”
In September last year Nationwide stepped in and merged with Derbyshire Building Society and Cheshire Building Society, although neither deal was caused by the Bank of England overtly acting.