The Bank of England has announced today that core parts of Dunfermline Building Society have been transferred to Nationwide
Building Society. Dunfermline’s retail and wholesale deposits, branches, head office and originated residential
mortgages (other than social housing loans and related deposits) have all been transferred to Nationwide. This follows a sale
process conducted by the Bank of England over the weekend of 28-29 March under the Special Resolution Regime provisions of
the Banking Act 2009.
It is business as usual for all customers. Dunfermline’s deposit business will continue to operate normally. Branches
and telephone banking will continue to open during their normal hours and customers can deposit and withdraw their money in
the usual ways. Savers can be assured that their money is safe. Loan and mortgage customers can continue to contact
Dunfermline in the usual way and should continue to make repayments as normal. All of Dunfermline’s staff have
been transferred to Nationwide.
The decision to transfer parts of Dunfermline’s business to Nationwide is designed to protect depositors and safeguard
financial stability. It follows a significant deterioration in Dunfermline’s financial position. The FSA determined
on Saturday 28 March that Dunfermline was likely to fail to meet the FSA's threshold conditions for authorisation and that
there was no other option available which would have enabled the company to satisfy the threshold conditions.
The social housing loans of Dunfermline’s customers (and related deposits) have been transferred temporarily to DBS
Bridge Bank Ltd, a ‘bridge bank’ owned and controlled by the Bank of England. This allows the Bank of England
to support Dunfermline’s social housing portfolio, consistent with the objectives of the Special Resolution Regime,
and provides time to secure a permanent solution.
A court order was made earlier today to place the remainder of Dunfermline’s business into the Building Society Special
Administration Procedure (BSSAP) and to appoint KPMG as the administrator. This part of the business includes commercial
loans, acquired residential mortgages, subordinated debt and most treasury assets.
In making these decisions, the Bank of England has acted under the powers conferred on it by the Banking Act 2009 and in
accordance with the Code of Practice issued by HM Treasury. The decisions followed consultation with the FSA and HM Treasury
and an evaluation of the possible resolution options against the Special Resolution Regime’s objectives laid down in
the Banking Act.
HM Treasury has concluded that if the transfer powers had not been exercised, Dunfermline would be unable to satisfy depositors’
claims against it. The Treasury has made a payment to Nationwide to cover the liabilities that are not covered by the
assets that Nationwide is also acquiring. In return, the Treasury has acquired rights in respects of the proceeds of
the wind-down and realisation of the assets of the administration estate, and is entitled to a claim on the Financial Services
Compensation Scheme (FSCS) as outlined in Sections 214B of the Financial Services and Markets Act 2000. The Treasury intends
therefore to require the FSCS to make a contribution to the transfer costs at the end of resolution in accordance with the
Financial Services and Markets Act.
The transfer to Nationwide Building Society took effect today through the issue of a Property Transfer Instrument by the
Bank of England, available on the Bank of England’s website. The Treasury will also lay a copy of the transfer instrument
before Parliament in accordance with the provisions of the Banking Act 2009.
Dunfermline chairman Jim Faulds, who has accused ministers of "sacrificing" the 140-year-old institution, said he believed
the successful bidder would be identified on Monday.
Two rival building societies and two banks are understood to be in the frame.
Mr Darling said the building society needed between £60 million and £100 million to continue. However, Mr Faulds insisted
the situation was not as black as was being painted, maintaining that the Dunfermline could remain as an independent institution.
The Government stepped in to protect depositors ahead of an announcement expected this week of losses of £26 million.
The Dunfermline Building Society is to be put on the market by the UK government.
It emerged on Saturday that the Bank of England is to manage its sale. It is thought the building society, which is Scotland's
largest, employs nearly 500 people. Dunfermline, which has 250,000 savers and 35,000 borrowers. The cash held by savers
Scottish Secretary Jim Murphy stated the government would protect the savings of the building society's customers. He said
Dunfermline Building Society is affected by the dramatic turmoil in the international financial markets and by some poor decisions
by the previous management of the company.
We have had to look all the potential rescue packages. We have looked at all the options and it is now very clear that
there has to be change in Dunfermline, but it is change that will mean every saver is protected. It is an important decision,
a dramatic decision, but Dunfermline needs a strong decision and that is what we took today.
Asked if the bank would be put on the market, he said: "We are finalising the details over the next few days. It is very
clear that Dunfermline in its current guise probably could not continue because of its exposure to the American sub-prime
market and the commercial property market.
We are looking to maximise the jobs and branches, and we want to protect every saver. We are looking at options
including the government taking some of the toxic debt and seeing if another investor, private company or building society
would come in and join together with Dunfermline to protect as many savers, jobs and branches as possible.
Having looked at the books and taken expert advice from the financial authorities, the traditional bail out that we have
seen at some of the banks is just not possible. We are looking at the model we had with Bradford and Bingley. Every single
saver will be protected and we are looking at maximising and protecting as many jobs and branches as possible. We are very
clear about that.
Last week, it was reported the UK Government was planning a £60million bail out of the building society amid fears it is
poised to reveal huge losses. Talks had been ongoing between the society, one of Scotland's oldest and largest financial institutions,
and the financial regulator.
The Financial Services Authority (FSA) is said 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
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.
The building society incurred losses 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 £26million, compared with a £2million profit in 2007. Dunfermline's
woes stem from its exposure to bad loans in the commercial property market.
Reacting to the Treasury announcement that the Dumfermline Building Society is to be sold off, First Minister Alex Salmond
"After talks with the Dunfermline Building Society, the Scottish Government made an offer to the Financial Servicves Authority
(FSA) and the Treasury two weeks ago, based on how we could make a capital contribution to assist in the society remaining
an independent organisation, and some guarantees on its valuable social housing book. That offer remains on the table, but
it does require Treasury approval.
"We welcome the indications that social housing finance is also a priority of the Treasury, but are deeply disappointed
that the Treasury now believe it is not possible to sustain the society as an independent institution, given the importance
to Scotland of HQ jobs and functions.
"We hope that the Treasury has not closed its mind to the idea that both in terms of employment, and in terms of value
for money for the public purse, maintaining Dunfermline Building Society as an independent and ongoing concern could well
be the strongest option, and in the interests of its members and depositors."
The Dunfermline's financial problems have been caused by a disastrous exposure. to a collapsing commercial property market.
More than 15% of the society's £3bn of assets comprise commercial loans and losses on these have plunged the society into
Although the society has yet to have its 2008 results signed off by auditors Deloitte, it will report pre-tax losses later
this week of £26m.
Jim Willens, the Dunfermline's new chief executive, was not involved in negotiations about the future of the society but
had been confident it could survive and hoped to turn it back into a simple provider of retail deposits and mortgages.
John Goodfellow, chairman of the Building Societies Association, tried to organise a rescue by calling together executives
from the Britannia, Nationwide, Coventry, Leeds, Skipton, Yorkshire and Chelsea societies. However Mr Goodfellow, a former
boss of the Skipton, was unable to convince the societies at the meeting that the Dunfermline merited rescuing. This is what
triggered the Treasury's move. In the past week, pressure on the Government to organise a rescue has intensified, especially
from Scottish MPs who are keen to keep alive Scotland's largest building society.