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30 March 2009
The Chancellor of the Exchequer and the Governor of the Bank of England have today announced a resolution for the Dunfermline Building Society that protects depositors, and provides a more stable and secure future for the society’s members.
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.
Under the Banking Act 2009, Dunfermline’s retail and wholesale deposits, branches, head office and originated residential mortgages (other than social housing loans and related deposits) have been transferred to Nationwide. This follows a competitive 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.
Dunfermline’s social housing portfolio has been placed into a bridge bank, wholly owned by the Bank of England. This will allow the Bank of England and the Treasury to determine the best outcome for this part of Dunfermline’s business and underlines the Government’s commitment to maintaining the availability of lending to Registered Social Landlords. The Government is talking to a number of people, including the Scottish Government, about securing a long-term future for the social housing book.
A court order was made earlier today to place the remainder of Dunfermline’s business into the Building Society Special Administration Process (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.
When considering the appropriate action to take, the Treasury took account of the scale of future losses faced by the society, the additional capital that would be required, and its very limited capacity to service new capital given its historically low level of profitability. It concluded that an injection of funds by the taxpayer would not be likely to provide value for money and would not provide a sustainable and lasting solution to the problems faced by the society.
On 28 March 2009, following the required consultation with the Treasury and the Bank of England, the Financial Services Authority (FSA) found that the general conditions for entry into the Banking Act Special Resolution Regime were satisfied in the case of Dunfermline Building Society. The Bank of England, having consulted the FSA and Treasury, considered the overall package offered by Nationwide to best meet the objectives of the Special Resolution Regime and the Treasury provided consent for the use of public money.
Today’s announcement also demonstrates the Government’s support for the wider mutuals sector and the important role that mutuals play in communities throughout the country.
1. Further details can be found on the Bank Of England website.
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