Page last updated at 09:35 GMT, Monday, 30 March 2009 10:35 UK

Q&A: Dunfermline building society

Dunfermline Building Society branch in Falkirk
Savers want to know why the society's finances deteriorated so quickly

The Dunfermline building society has been rescued by the combined efforts of the government and the Nationwide building society.

The taxpayer is taking on responsibility for millions of pounds worth of dud commercial loans and high-risk mortgages that the society bought from other lenders, plus the society's own borrowings.

All the other mortgages, savings accounts, branches, staff and head office have already been taken over by the Nationwide.

This means the Dunfermline is open for business as usual, operating as a separate brand of its new parent.

I have money in a savings account. Is my money safe?

Yes. That is the meaning of this deal. If the society had collapsed completely and shut up shop, up to £50,000 of savings would have been covered anyway by the Financial Services Compensation Scheme (FSCS).

But now that the Nationwide has stepped in, assisted by some extra top-up from the Treasury to cover any shortfall, all savers' money is now safe.

What about my Isa and deposit accounts?

The same applies to you. The Nationwide says it is honouring all the terms and conditions of Dunfermline accounts.

This does mean that if you have certain fixed-term bonds, or other accounts that have a specific maturity or payout date, you will still have to wait. But your money will be safe in the meantime.

How come no one told me the Dunfermline was in trouble?

What a good question. It is typical of all businesses that they disguise the awful truth until the last minute. This can be for the very good reason that they do not want to jeopardise any behind-the-scenes rescue deal.

That was true at the Dunfermline, which had been trying to persuade the government to lend it extra cash for the past six months or so.

But the most recently available accounts, for 2007, give no hint at all that any of the society's dealings might be so potentially risky that they could bring it down.

That is something that the society's former management and auditors might like to explain.

Was the society bust?

"Dunfermline Building Society is well capitalised with strong liquidity and a robust balance sheet," the society said its annual report for 2007. But just over a year later, the authorities have come to the conclusion that things have changed drastically.

The Financial Services Authority (FSA) believed it was not safe to let the society continue independently.

And the Bank of England explained that "HM Treasury has concluded that if the transfer powers [to the Nationwide] had not been exercised, Dunfermline would be unable to satisfy depositors' claims against it".

So yes, the Dunfermline was on the verge of going bust.

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