Dunfermline BS Stability

*MF*

Just a thought in passing ...

Dunfermline has what (?) 250,000 savers - and is at risk because of commercial property.

Iceland meanwhile only has 340,000 inhabitants ...

With the amount of money lent and borrowed thru' Iceland Banks - for every purpose under the sun - I still don't understand how anyone saw Icelandic Banks as safe?

baby_boomer

Yes. I warned against them on these boards for that reason - but let's not get off topic.

bristolleedsfan

BB. :hello: Did u make your withdrawal request on Monday, if so have u had anything back? I sent mine off Monday to Dunfermline Freepost address :rotfl: not had anything back yet.

baby_boomer

Not yet, although I'm not posting from home. We might not be the only ones blf .

baby_boomer

It took the press a while to uncover this.

Herald - Dunfermline woes extend to IT system subsidiary

"The Dunfermline Building Society, which is expected to accept a taxpayer bailout reported to be in the region of £60m, has poured £31m into a loss-making subsidiary it set up to develop a specialist mortgage IT system.

## Doh! And we thought we were just saving with a boring building society, when all the time we were providing the management with share capital, which they hadn't mentioned to members :eek: .

"Analysts believe the troubled lender - Scotland's biggest building society, with more than 300,000 savers, 35,000 borrowers and 490 staff - may have overstretched itself in an attempt to develop the system and sell it in the UK and overseas....."

Sounds like they tried to do a Skipton BS but didn't have a hard headed computer literate boss like John Goodfellow i/c .

Herald - Just why did Dunfermline BS pump £31m into unproven IT project?

"As the UK and Scottish governments ponder the first state rescue of a building society holed by a risky commercial property loan book, they may also want to examine why Dunfermline Solutions was set up as a subsidiary of the society to "provide software solutions and back-office services to deposit takers and mortgage lenders".

The society's last annual report published 13 months ago revealed a £9.5m write-down on its IT development but not its ambitious business development plans.

The statutory accounts of the subsidiary, published only five months ago, show that it wrote down £6.9m against "the value of assets in the course of construction", but continues: "The directors are committed to the completion of the development of these systems."

Resources would be made available "through the on-going support" of the society, they went on, concluding: "The directors believe there is a market opportunity for the provision of an operating system that can be offered both in the UK and overseas."

Dunfermline Solutions made a £5m loss (£7.9m before a tax credit) and was left with assets of £20.7m and a deficit of £10.7m - after swallowing up £31.4m to date from the Dunfermline Building Society......"

".....Asked yesterday whether the project to develop the new business had now been aborted, the Dunfermline declined to respond..."

No medium sized societies do anything other than dabble in commercial lending (not 15% of their loan book) or develop their own IT rather than buying it off the shelf.

Yet

"The last annual report is packed with glowing testimony to the society's careful management, its rigorous corporate governance, and the mutual benefits' to members...."

.....In its last report, the Dunfermline assured: "Building societies are subject to more stringent regulatory controls than banks and DBS adheres strictly to these requirements."

Jim Faulds....who chairs the building society....earlier in 2008...called Dalziel's leadership "sensational".

Edinburgh Evening News - Same story

baby_boomer

Property Week - Dunfermline sues AIG over bad property loan

"Dunfermline, the ailing Scottish building society, is suing US insurer AIG over £2m of failed loan payments for a £100m residential scheme in ReadingDunfermline provided loans and credit facilities to Kenavon Drive (Jersey), a subsidiary of Highmore Homes, to develop more than 500 homes. In December last year Highmore Homes went into administration. [They had underestimated costs by £24m. AIG is the loan guarantor.]

".....Under the terms of the loan agreement Dunfermline was entitled to call in all interest payments because of the ‘material adverse effect’ on the value of the scheme..."

baby_boomer

Scotsman - Salmond meets Darling in top level talks about Dunfermline

".....A spokesman for Mr Salmond said: "Our position is clear – we stand ready to be part of any initiative in relation to our responsibilities to support employment, headquarters functions in Scotland, and the provision of social housing.

"The Chancellor indicated that these were key matters for him as well, and will no doubt wish to set out the UK government's position in due course."

A rescue announcement and the Dunfermline's results may come out "as early as Monday"

And the Dunfermline is to be debated in parliament [not sure which one] next week as well.

baby_boomer

Scotsman - MP's plea to FSA - Lower the capital requirements of the Dunfermline

"THE FINANCIAL Services Authority has been told to follow its chairman’s advice and reduce the capital requirement for the Dunfermline Building Society.

MP Willie Rennie said the capital requirement rules were being brutally enforced by the FSA which requires the Dunfermline Building Society to set aside a reported £20 million to £30 million in additional reserves.

Yet the chairman of the FSA, Lord Turner, last week recommended a more flexible approach that requires less to be set aside.

Mr Rennie said, “The FSA seems to want the society to save for a rainy day when there’s a thunderstorm outside and a huge hole in the roof.

“A capital requirement of 8% is ridiculously high especially when the society is in difficulty.

“Lord Turner suggests that 4% during times of economic difficulty would be more appropriate. That’s welcome thinking but I want to know why it can’t be implemented now.”

## - This business is a real education for our Willie!

Count_Dante

It just goes to show that members, of which I am one (a would be carpetbagger!), were not really in control of this organisation. The management ran it like economic theory would suggest when owners are unable to exert effective control - to maximise income and stuff long term factors. May this be the end of those pointless votes where abstainers are counted as voting 'for' the current management.

baby_boomer

Accountability at mutuals is a cause for concern because members have less knowledge than institutional shareholders - not that institutions saw the financial typhoon that has hit us all.

It would help if mutual boards took the trouble to explain themselves.

"Look - we are diverging from the simple savings & loans BS model to invest £31 million of your money in a subsidiary IT company and £xx millions in commercial property, and we think this a good idea for members because ................."