FSA rapped over Dunfermline failures

by Gill Montia

Story link: FSA rapped over Dunfermline failures

The Financial Services Authority (FSA) has been called to account over its dealings with Dunfermline Building Society.

Scotland’s largest building society came close to collapse in March, when Nationwide acquired certain of its assets.

At the time, part of the lender’s mortgage book, deposits of around £2 billion and 34 branches were transferred using new powers under the Banking Act.

The House of Commons Scottish Affairs Select Committee has now criticised the FSA for its inadequate supervision of the society and failing to issue clear and specific warnings.

Fault was also found in the way in which Dunfermline was kept “in the dark” as the regulator and other authorities proceeded to break it up.

However, the society has ultimately been held responsible for its own failings, which included the risk profile of its commercial loan book and investing in US buy-to-let and self-cert mortgages.

In June, the FSA finally got around to addressing building society risk management and launched a consultation aimed at ensuring societies with “less traditional” business models have the risk management systems and skills they need.