Nationwide is to buy a large part of the Dunfermline Building Society, which has collapsed under its unsustainable debts after the government declined to bail it out.

Under a deal announced this morning, Dunfermline’s branches, good loans and deposits have been sold to the Nationwide Building Society.

However, Nationwide has refused to buy up its high-risk assets, such as self-certification mortgages made at the height of the housing boom. The tax payer will have to foot the bill for these, along with bad loans from Bradford & Bingley.

Nationwide confirmed that Dunfermline, which was established 150 years ago, would keep its name. The building society warned of possible job losses in Dunfermline’s back office and support operations, but said there would be no compulsory redundancies in its branches in the next three years.

The deal with Nationwide was struck just 2 days after the government announced that Dunfermline was up for sale following losses of £26 million.

Graham Beale, chief executive of Nationwide, said the deal would safeguard the savings of 300,000 Dunfermline account holders.

“This is good news for the members of Dunfermline who are now joining the world’s largest building society,” said Beale. “As members of a solid, stable and dependable organisation, members of Dunfermline can be assured that their savings are safe.”

The Bank of England said: “It is business as usual for all customers. Dunfermline’s deposit business will continue to operate normally. Savers can be assured that their money is safe.”

Dunfermline’s chairman Jim Faulds, however, claimed that the building society could have been saved if the government had given it a loan via its liquidity scheme.

“The Treasury didn’t want to take the risk … we could have had a sustainable, independent future,” he claimed.

But Alistair Darling warned yesterday that Dunfermline was effectively insolvent, and would have required between £60m and £100m from the taxpayer to prop it up, which it would have struggled to repay.

This entry was posted on Monday, March 30th, 2009 at 11:15 am and is filed under Banking, Loans, Mortgages, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.