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Forced sale of building society Forced sale of building society
(10 minutes later)
The Dunfermline Building Society has collapsed and is to be put on the market by the government, BBC Scotland has learned. Scotland's largest building society has collapsed and is to be put on the market by the government, BBC Scotland has learned.
It was hoped the building society could continue with a government bailout of between £60m to £100m. It was hoped the Dunfermline could continue with a government bailout of between £60m to £100m.
However, now the Bank of England is to manage its sale, signalling that this has been forced by regulators. However, the regulators have decided it is no longer viable, with a £26m loss expected to be announced next week.
The Scottish Government said it accepted the sale but regretted it could not continue as a going concern. The Scottish Government said it was deeply disappointed that it could not continue as a going concern.
The tri-partite regulators - the Bank of England, the Financial Services Authority and the UK Government - have decided the Dunfermline is no longer viable, with a £26m loss expected to be announced later this week and further problems likely to emerge. The tri-partite regulators - the Bank of England, the Financial Services Authority and the UK Government - have decided the Dunfermline is no longer viable, with a multi-million pound loss expected and further problems likely to emerge.
The building society is to be broken up in the same way as the Bradford and Bingley, which saw Spanish bank Santander taking over its savings accounts and branches, and the government having temporary control of its mortgages and loans.The building society is to be broken up in the same way as the Bradford and Bingley, which saw Spanish bank Santander taking over its savings accounts and branches, and the government having temporary control of its mortgages and loans.
Protecting saversProtecting savers
BBC Scotland business editor Douglas Fraser, who broke the story, said a key problem was the building society's exposure to risky assets.BBC Scotland business editor Douglas Fraser, who broke the story, said a key problem was the building society's exposure to risky assets.
He said it lost more than £9m in its own IT business and sold off some of its mortgage book to troubled American finance houses, GMAC and a subsidiary of Lehman Brothers.He said it lost more than £9m in its own IT business and sold off some of its mortgage book to troubled American finance houses, GMAC and a subsidiary of Lehman Brothers.
It is expected that the UK Government will now turn its attention to protecting savers at the Dunfermline, and safeguarding jobs.It is expected that the UK Government will now turn its attention to protecting savers at the Dunfermline, and safeguarding jobs.
The building society employs nearly 500 people, half at its headquarters in Fife and half in the network of 34 branches.The building society employs nearly 500 people, half at its headquarters in Fife and half in the network of 34 branches.
Meanwhile, the Scottish Government will be considering how to protect its role in lending for social housing in Scotland.Meanwhile, the Scottish Government will be considering how to protect its role in lending for social housing in Scotland.