Dunfermline BS Stability

ahai1

Is there anyone else left to take anyone else over/

bristolleedsfan wrote: »

U dont seem to understand that the concept that underpins "Mutuality" and "Building Societies" is that "losses" dont get made, when they do its normally a cue for a takeover by a "stronger" BS Society.

bristolleedsfan

ahai1 wrote: »

Is there anyone else left to take anyone else over/

I was merely explaining the concept that losses amongst mutuals are regarded as being unacceptable. They exist to operate risk free, i.e they gain deposits from Mr X and loan money to Mr and Mrs Y, should Mr and Mrs Y default then the BS is only liable for the 75%ish of the advance due to insurance indemnity, prudent lending means that their are less who default than default, Building Societies also profit from the concept of savings/morgages, losses in the BS sector are rare. Commercial lending should be left to Banks thats not what Building Societies exist for and/or specialise in.

Heraclitus

You might suggest that our wonderful Chancellor was a little economical with the truth - I really couldn't comment.

I wasn't glossing over the possible shortage of capital - it would be uncomfortable and less than the FSA would wish - but it wouldn't necessarily make the Dunfermline a basket case and certainly not in the same league as the ex-building societies. I think it could survive in the short term but whether its long term survival chances would be that bright must be open to question. But at least there would be no need for anyone to panic.

I agree fully that in the long term, shrinkage is not a good strategy. However, as a short term measure it has a lot to commend it provided tight cost control is maintained. It could even lead to better rates for investors as more of the interest from borrowers can be disbursed to investors rather than having to retain some as profits (but not if the society needs to recoup losses of course) as no growth means that capital ratios stay the same with zero profits.

I think there are still around 50+ societies - so plenty of takeover possibilities still provided the big ones don't get indigestion from those they have already gobbled up.

jack_spratt_2

bristolleedsfan wrote: »

I was merely explaining the concept that losses amongst mutuals are regarded as being unacceptable. They exist to operate risk free, i.e they gain deposits from Mr X and loan money to Mr and Mrs Y, should Mr and Mrs Y default then the BS is only liable for the 75%ish of the advance due to insurance indemnity, prudent lending means that their are less who default than default, Building Societies also profit from the concept of savings/morgages, losses in the BS sector are rare. Commercial lending should be left to Banks thats not what Building Societies exist for and/or specialise in.

You are spot on with your comments and its the building societies who have tried act as a bank who have got into difficulties .
The sooner we return to the days of sensible lending the better but I do think the media has a lot to answer with irresponsible reporting

baby_boomer

Dundee Courier

Heroic local MP William Rennie will leave no stone unturned on his quest to keep Dunfermline BS an independent mutual based in Dunfermline

He's found a minister to talk to who no-one's ever heard of.

Avina_Popp

I have an ISA with Dunfermline Building Society.

Less than 24 hours before this news hit the airwaves I received a stock letter from them which included the following comment "In uncertain times it's important you feel comfortable about who you invest your money with."

I did smell a rat.

baby_boomer

Scotsman - Dunfermline rescue could depend on rival societies taking PIBS in Dunfermline

Hero Will Rennie's not satisfied with this and why should he be? Rivals would rightly demand the sort of 10%+ return on the PIBs commensurate with the Dunfermline's financial "strength" and likely to weigh down the prospects of a strong recovery and leave Dunfermline a lame duck. But then government money would do the same thing - assuming someone was actually looking after taxpayers' interests. Wake up Willie.

FT Adviser - Dunfermline must reassure its members now to avoid a run on the society

Perhaps the Chief Executive could issue amended reassurance no. 3 on the website which all Dunfermline members visit daily :rolleyes: . Given that Dunfermline send about a dozen letters to me every year, it's amazing that they've chosen to ignore the old fashioned approach when it actually matters. How to let trust seep away?

Business News Link - Dunfermline rescue plan expected to be announced today (Thursday) or tomorrow

"......Meanwhile, the former chief executive of the society has withdrawn from presenting a workshop on helping organisations get through difficult times.

Glaswegian Graeme Dalziel, 55, suddenly retired in December.

He was due to speak on Friday at a conference in Dunfermline called Shaping The Future - Prepare For The Economic Turnaround."

Priceless :rotfl: :rotfl: You couldn't make it up.

ahai1

Someone said that he found a minister to talk to no one has heard of. Who did Willie find?

Maybe the former CEO got scared of what happened to Fred the Shred Goodwin.

Heraclitus

"......Meanwhile, the former chief executive of the society has withdrawn from presenting a workshop on helping organisations get through difficult times.

Glaswegian Graeme Dalziel, 55, suddenly retired in December.

He was due to speak on Friday at a conference in Dunfermline called Shaping The Future - Prepare For The Economic Turnaround."


Whoops!

Interesting to compare this to the Newcastle B S which posted a pre-tax loss of £35.7million (largely blamed on Iceland) earlier in the month and which has mostly been ignored.

baby_boomer

Heraclitus wrote: »

Interesting to compare this to the Newcastle B S which posted a pre-tax loss of £35.7million (largely blamed on Iceland) earlier in the month and which has mostly been ignored.

A key difference is that an Icelandic bank loss is a one off, whereas commercial property risk is ongoing and also affects the capital requirements demanded by the FSA.