Brown rejects critics of building society takeover

Mar 31 2009 by Alun Thorne, Birmingham Post

Prime Minister Gordon Brown yesterday branded Dunfermline Building Society an “author of its own mistakes” as the Government stepped in to lead a rescue sale and break-up of the ailing mutual.

Nationwide Building Society will take on the core parts of Dunfermline under the deal, brokered at the weekend to save the society from collapse.

The 140-year-old Dunfermline brand will remain intact and all 530 staff and 34 branches will transfer to Nationwide.

But the British taxpayer is thought to have picked up the tab for around £1billion of risky debt and some parts of the society not bought by Nationwide have been placed in administration.

Mr Brown rejected criticism of the Government’s role.

He said all savers would be protected, adding: “Let’s face facts – the Dunfermline building society is the author of its own mistakes: mistaken judgments, mistaken investments, mistaken policies.

“We have had to step in where the Dunfermline building society has failed, and we have stepped in in such a way that we can protect both the savers and give those people who depend on the building society for mortgages a way through for the future.”

The Bank of England used new powers under the Banking Act to rush the deal through – the first such move under the legislation.

The tripartite authorities -–the Treasury, the Bank of England and the Financial Services Authority – said the sale was vital to save Scotland’s largest building society from going bust.

Nationwide has taken on Dunfermline’s retail and wholesale deposits, branches, head office and most of its residential mortgage book.

The Bank of England stressed it was “business as usual for all customers” and that all saver deposits were safe.

And the Bank has temporarily taken control of the building society’s social housing loans customers and related deposits, which were not included in the sale.

The Treasury said full nationalisation of Dunfermline would not have provided “value for money” for the taxpayer. But the deal was met with disappointment in Scotland that it could not have been supported to remain independent.

Protesters angry at its sale staged a demonstration outside the mutual’s head quarters in Dunfermline, Fife.

Dunfermline has more than 300,000 customers, with £2.35billion in retail deposits and £1.02billion in mainstream mortgage lending.