Dunfermline BS Stability

People in Scotland will remember this advert from a few months ago - shown just as it will have become clear to management the extent of the building societies troubles:
http://www.youtube.com/watch?v=93VZPVIsWcc

Still, at least all they did was waste money on a few TV adverts and were not able to do a Bradford and Bingley and get a few hundred million from shareholders then go belly up weeks later.

has poured £31m into a loss-making subsidiary it set up to develop a specialist mortgage IT system.

What is the resale value?


.

baby_boomer wrote: »

Why would anyone want to take it over?

I also reckon the BS movement might be in the mood to give the government one in the eye in retaliation for their disproportionate share of the FSCS levy for bailing out Iceland & B&B.

jack_spratt wrote: »

This is how mutual societies act !!they would step in and rescue the under preforming society!! keep it in the family so to speak

So glad you've come round 180 degrees to the common sense position, jack

The Times has some new details.

Times - Brown's building society on the brink

"The Treasury is working on a weekend rescue deal to save Dunfermline building society, in a move that could see the mutual broken up or bailed out with taxpayers’ money. The struggling mutual, head-quartered in prime minister Gordon Brown’s constituency, has drafted plans for a £30m recapitalisation deal involving about £15m of taxpayers’ money. A further £25m could also become available from the Scottish government.

However, Treasury officials have been conducting a separate auction process, which could see the group split up with its 350,000 savers and 35 branches transferred to a rival institution. An information memorandum was circulated among a number of banks and building societies last week, inviting bids for all or part of the business. Dunfermline’s loan book is worth about £3.3 billion.

Bank of Ireland and Santander are among those believed to have been approached by the Treasury, along with a number of building societies including Nationwide, Yorkshire and Skipton...........

...........It is due to sign off its accounts on Tuesday, but will be unable to do so without further capital being found. Last night, it was unclear whether Dunfermline’s management was aware of the auction process taking place.

The society’s recapitalisation plan had been drafted in league with the Building Societies Association. Britain’s top six building societies had agreed to buy £15m of Perpetual Income Bearing Shares – a bond-type investment commonly issued by building societies. That would then be matched with an equal investment from the Treasury."

The interesting thing is the relatively muted reaction from the SNP Scottish government. It must be dire for them to be going along with it so meekly.

Ah well. Any truce is over. This is going to be one hell of a bun fight. Why else do we have devolution ?

Sunday Herald - Furious Dunfermline Chairman brands sell off a scandal

[That'll be the same Jim Faulds that branded Dalziel's leadership as "sensational" BTW]

"The Chairman of the Dunfermline Building Society, Jim Faulds, last night launched an outraged attack on Treasury plans to break up and sell off his beleaguered company.
Faulds hit out as it emerged that both he and the rest of the top tier of the Dunfermline management team could be replaced as early as tomorrow.

He was backed up by the first minister, Alex Salmond. Dunfermline, Scotland's largest building society, is expected to declare losses of £26 million in coming weeks The Scottish government says it will work to preserve Dunfermline's independence. Faulds described the pledge as "magnificent". Salmond said he was disappointed in the Treasury moves.

As the break-up and sell-off plans came to light, Faulds said that Dunfermline's management had been left out in the cold during recent negotiations, and he branded the Treasury's handling of the situation "a scandal".

"We are extremely disappointed with HM Treasury's decision," he said. "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."

Yesterday afternoon, the Treasury used its new powers to force a "Bradford & Bingley" style solution on Dunfermline.....[leaving] UK taxpayers footing the bill for.... [its] toxic loans.

A bid for the [detoxed] Fife-based building society is expected to be lodged with the Bank of England tomorrow................

Speaking after the sell-off plan was revealed, Scottish secretary Jim Murphy said the problems with Dunfermline were so severe that a simple government cash injection would have no effect.

"Dunfermline suffers from real and systemic weaknesses because of the foolish decisions of some of the previous management and also because of the international economic crisis," he said.

"If there was the standard bail-out that we have seen in some of the other situations, there is a real worry that the Dunfermline couldn't actually service the debt.......

....Faulds said: "We had no sub-prime lending. We're not an Icelandic bank. It's wrong to suggest this. I consider this step by the FSA and the Treasury wholly and absolutely unnecessary. It's a scandal."

Salmond said: "... the Scottish government made a [cash injection] offer to the FSA and the Treasury two weeks ago ... That offer remains on the table, but it does require Treasury approval."

Salmond added that he was "deeply disappointed that the Treasury now believes it is not possible to sustain the society as an independent institution, given the importance to Scotland of HQ jobs and functions......

.....A senior SNP government source added: "We are disappointed, but we're more disappointed with the way the whole decision-making process seems to have happened.....

....Willie Rennie, the local Liberal Democrat MP for Dunfermline, denounced the government plans as a "betrayal" and insisted that a rescue deal was still possible. He blamed the UK government..........."

## - Does anyone seriously think that if there was another viable solution, that the government wouldn't have taken it - given the acute political embarrasment about to ensue at the G20 and in Labour's core Scottish heartland?

The Sunday Times today leads on how Merkel is determined to scupper Brown's ideas for more global tax cuts & the trouble at Dunfermline supports her case.