Building societies make errors, too

The protracted termination of the Dunfermline Building Society last week raises some interesting questions.

Uncertainty about a building society’s future used to be kept under wraps until a suitable takeover partner had been found and a merger could be announced.

This has not been the case with Dunfermline where media stories about a £26m loss were linked with a government bailout and in some cases it’s even been portrayed as the mutual sector’s very own Royal Bank of Scotland.

Obviously the deal with Nationwide has been executed under the new arrangements contained in the Banking Act 2009 but it would seem that everybody was playing politics.

Even the Prime Minister jumped on that bandwagon on Monday, accusing the society as being “an author of its own mistakes”, though it sounded more like a mea culpa moment when he went on to refer to mistaken judgements, mistaken investments and mistaken policies.

Nationwide will obviously benefit from the acquisition of the Dunfermline’s mainstream mortgage book and retail savings but as the facts emerge it seems certain that it would have done its members a huge disservice if it had jumped in earlier with a more comprehensive rescue package.

The scale of Dunfermline’s problems serves as a reminder that when it comes to making errors of judgement, the form of ownership is irrelevant.