Stricken Dunfermline building society has been saved from collapse in a rescue deal with Nationwide.
Nationwide Building Society has bought core parts of the 140-year old institution – which is Scotland’s largest building society – snapping up its retail and wholesale deposits, branches, head office and most of its residential mortgage book.
The deal, which follows a sale process led by the Bank of England over the weekend, will see around 530 of Dunfermline‘s staff transferred over to Nationwide.
The Bank of England stressed it was ‘business as usual for all customers’ and that all saver deposits were safe.
For customers who have accounts with both Nationwide and Dunfermline, in the event of any future collapse there will continue to be separate compensation limits for each account as if the two societies hadn’t merged.
Dunfermline brand safe
The Nationwide confirmed that the Dunfermline brand would remain intact after the deal.
But the remaining parts of the building society not included in the takeover – including riskier assets and debt such as commercial loans and some residential mortgages – have been placed in administration.
The Bank of England said it used new powers under the banking act to rush the deal through, which would otherwise have seen the Dunfermline go bust.
A small group of protestors staged a demonstration against the takeover outside the Dunfermline’s head office earlier today.
However, the taxpayer has picked up a bill paid to Nationwide to cover liabilities not covered by the assets it is acquiring.
And the Bank of England has temporarily taken control of the building society’s social housing loans customers and related deposits, which were not included in the deal.
The treasury is due to reveal how much was paid by Nationwide and any taxpayer liability.
Savers’ deposits secure
The Bank of England said: ‘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.’
Two of the Dunfermline’s savings products recently dropped out of Which? Best Buy tables when their rates were no longer as competitive as the best on the market.
Protect your savings
Vera Cottrell, principal policy advisor at Which said: ‘We welcome the decision to keep separate compensation limits for customers who already had accounts with both Dunfermline BS and Nationwide before the merger.
‘However, this is an unfortunate reminder that building societies are not immune from the current economic turmoil, something consumers should keep in mind when looking for the best home for their savings.
‘It remains important for savers to ensure that they don’t breach the compensation limit of £50,000 with any one FSA authorised entity.’
You can find out more about the financial services compensation scheme in our guide to protecting your savings.
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