'Action needed' to help Dunfermline Building Society
The cost of failing to act to save the Dunfermline Building Society would be “immeasurable”, politicians warned today.
Ministers at Holyrood and Westminster were urged to work together to ensure everything possible is done to assist the troubled institution.
The UK Government is reportedly planning a £60m (€63.9m) bail-out of the building society amid fears it is poised to reveal huge losses.
Labour’s Dunfermline East MSP Helen Eadie told BBC Radio Scotland today: “The cost of not doing anything is something that is immeasurable.
“We have to make sure that we do afford this cost because we can’t even contemplate not doing anything.”
It is understood that talks are ongoing between the society, one of Scotland’s oldest and largest financial institutions, and the financial regulator.
The Financial Services Authority (FSA) is understood to have approached a number of rival building societies in recent weeks to try to secure a takeover offer.
Britannia, Nationwide and Yorkshire have all been linked to a possible sale, but no deal has yet been agreed.
Dunfermline is involved in the provision of social housing in Scotland and it is understood the Scottish Government has planned a package of assistance for the ailing lender.
Yesterday both Scottish Secretary Jim Murphy and Deputy First Minister Nicola Sturgeon pledged that their administrations would do whatever they could to help.
Former Liberal Democrat leader Menzies Campbell said it was important that the both the SNP Government in Edinburgh and Labour ministers in London were “plugged into” the problem.
“We don’t want any question of Westminster and Holyrood being at odds,” he said.
“Both at Holyrood and at Westminster absolutely everything has got to be done to make sure that the Dunfermline continues as a viable mutual organisation with a capacity to make a substantial contribution to the economy of Scotland.”
The building society is “technically bust” as a result of losses incurred in its commercial property and residential loan books, it has been reported.
Dunfermline is thought to be on the brink of announcing an expected loss of £26m (€27.7m) in the next few weeks, compared with a £2m (€2.1m) profit in 2007.
It is understood Dunfermline’s woes stem from its exposure to bad loans in the commercial property market.
A spokesman for the Treasury said at the weekend that it would not comment on individual institutions.
But he added: “The authorities have repeatedly made it clear over the past year that they will take whatever steps necessary to maintain financial stability and to protect savers.”
Sir Menzies said the speculation surrounding the Dunfermline was concerning because it was a mutualised model which most people thought were “in much better shape” than troubled Scottish banks like the Royal Bank of Scotland and HBOS.
He played down a suggestion that the society could be taken into public hands.
“I don’t think there’s any enthusiasm for nationalism,” he said.
But, he said, in the longer term the Government could alter the Building Societies Compensation Scheme that penalises building societies which must lay aside “very substantial” reserves to meet potential liabilities.
