Scottish led offer for collapsed 'reckless' Dunfermline was refused

While the bickering over the collapsed Dunfermline building society continues, with who did what or offered how much & when doing the rounds, the Nationwide has taken over DBS after intervention from the FSA & Bank of England.

Its a pity DBS collapsed, but protracted discussions and talk of offers doesn't always amount to a deal ... (lessons to be learned for next time ? – Ed)

The Scotsman reports :

Scottish rescue bid for DBS 'was blocked'

Published Date: 31 March 2009
By ROSS LYDALL

COLLAPSED building society Dunfermline was offered a possible merger with a Scottish-led consortium just weeks ago, it emerged last night.

Scottish Friendly Assurance revealed an initial approach was made in the middle of this month to the ailing mutual, which was taken over by the Nationwide yesterday.

But there were claims the possible rescue bid was effectively blocked on "numerous" occasions. News of the secret approach was revealed as details emerged of the reckless spending that led to the emergency rescue of the Dunfermline by Nationwide.

The Scotsman has learned the Dunfermline offered loans of up to £20 million to an "insolvent" property firm in Lancashire, which then used the cash to provide 100 per cent mortgages on rundown terraced homes in the north of England. This was typical of about £800 million of investments made by the Dunfermline.

The building society was put up for sale on Saturday by the government after a Treasury bail-out was ruled out.

But Scottish Friendly claimed last night that the consortium had made several attempts to open negotiations with Dunfermline officials, but were not given an opportunity to meet them until Sunday, the day after it had collapsed.

In a statement, Scottish Friendly said: "Although numerous attempts were made to open exploratory negotiations with DBS, we were not given an opportunity to meet with them until Sunday, less than 24 hours before a deal was announced.

"While we are of course pleased that the position of DBS members has been secured, the announcement of (the] deal with the Nationwide precludes a Scottish-led solution that may have been a possibility if talks had been agreed between the consortium and DBS at an earlier stage in the process."

Stewart Hosie, the SNP's Treasury spokesman, said last night: "The possibility of alternative bidders – including a Scottish-based bid – that could have seen HQ functions and jobs remain in Scotland is something that all parties should have been aware of prior to the deal with Nationwide.

"The revelations over a possible bid from Scottish Friendly and the speed at which decisions appear to have been made only add to the list of questions the Treasury and the FSA (Financial Services Authority] must answer.

"Once again, a Scottish institution appears to have been sold off in haste without a thorough examination of the options. The FSA, the Treasury and the Dunfermline must reveal what offers where on the table and when."

Jim Willens, the outgoing chief executive of DBS, who will resign in the wake of the Nationwide deal, said: "I am not in a position to comment on any individual approaches. What I can say absolutely 100 per cent is that any proposition or proposal put to the society was looked at thoroughly and immediately."

Alistair Darling, the Chancellor, yesterday announced the government was sinking more than £1.6 billion of taxpayers' money into rescuing the Dunfermline.

Nationwide is to buy all of its branches, "good" loans and deposits, although the brand name will remain. However, it said some of the society's 530 employees "may not be required".

As the Prime Minister branded the stricken mutual the "author of its own mistakes", there was cross-party condemnation of the Dunfermline's board – and demands for an explanation as to why the City watchdog, the FSA, had failed to intervene as the building society's risk-taking increased.

Mr Darling called on Lord Turner, the FSA chairman, to explain its role in supervising the Dunfermline. There was also pressure on the outgoing Dunfermline chairman, Jim Faulds, and the former chief executive, Graeme Dalziel, who left the company last December.

Since 2006, the society had shed its reputation as a safe haven of 140 years' standing to embark on risky investments, such as the purchase of self-certified mortgages from two US firms – one a subsidiary of collapsed bank Lehman Brothers – and to lend to commercial property firms.

Vince Cable, the Liberal Democrats' Treasury spokesman, told MPs the Dunfermline board had been guilty of "disastrous management" and a failure of oversight in allowing it to run up a £24 million loss for 2008.

That required the Treasury, Bank of England and FSA to put the rescue package in place which has resulted in the Dunfermline's staff, retail and wholesale deposits, branches, head office and original residential mortgages being transferred to the Nationwide.

A "bridge bank" has been set up to oversee its social housing portfolio in Scotland, while accountancy firm KPMG has been appointed to sell off commercial loans, which will be used to help repay the £1.6 billion to the taxpayer.

Mr Cable told the Commons DBS made a £10 million loan two years ago to Lancashire property firm In House plc – a company that was "loss-making, insolvent and had never filed any accounts".

He added: "There were substantial numbers of loans of this kind taking place. Is this not an absolutely gross failure of regulation by the FSA? It's very difficult to see how this could have happened under the old building society regime, which kept a much closer eye on the conduct of these societies."

Papers seen by The Scotsman suggest that In House used the 2007 loan to provide 100 per cent mortgages on multi- occupancy or rundown terraced homes in Hull, Stockton and Lancashire, and an industrial unit in Scotland.

A year later, it obtained a second £10 million loan from the Dunfermline, and it has withdrawn some £3 million to £4 million for similar lending. About 25 of the properties are said to be uninhabitable because of the amount of repairs required. The firm could not be reached for comment last night.

Mr Cable, Mr Darling and George Osborne, the shadow chancellor, were united in condemning the failures of the mutual's board and its decision to purchase more than £150 million of self-certified loans from the two US firms – GMAC and the Lehman subsidiary – and embark on £650 million of commercial property lending.

Mr Darling said the Dunfermline's toxic investments were made shortly before the credit crunch that led to the collapse of the residential and commercial markets. He added that the Dunfermline was now losing money as a result of firms collapsing or defaulting on repayments.

Mr Darling said Nationwide had promised there would be no compulsory redundancies for the next three years for the 345 staff of the Dunfermline's 34 branches in Scotland. However, he could give no guarantee for head office staff.

Royal Bank of Scotland to be probed by FSA over ‘bullied directors’ allegations

What a happy bunch of people the Royal Bank of Scotland board members must have been, as allegations of bullying of non-executive board members is revealed by Labour MSP Lord Foulkes.

Sounds a bit like some of the goings on at other institutions in Scotland we could name …

The Herald reports :

Regulator to probe ‘bullying’ of RBS directors

MICHAEL SETTLE, UK Political Editor March 23 2009

The Royal Bank of Scotland last night denied there was any evidence that its non-executive board members were bullied into silence over its risky business ventures, as the beleaguered institution was hit by another series of damaging claims.

Lord Foulkes, the Labour MSP and former Scotland Office minister, raised concerns after being briefed by ex-RBS insiders. They said non-executive directors faced "intimidation" about asking searching questions about the bank's activities, for fear they might not be reappointed.

He suggested that if this was true, it could lead to criminal prosecution.

The peer has also asked Lord Turner, chairman of the Financial Services Authority (FSA), to investigate whether the bank made "knowingly false statements", which could have led potential investors to believe RBS's position was more favourable than it was.

The City of London watchdog said it would look into the issues raised by the former minister.

However, a spokeswoman for the Edinburgh-based bank told The Herald it was "not aware of any evidence to support" the claim of intimidation and no non-executive director past or present had raised the issue with the company or the FSA.

She said if Lord Foulkes had any evidence to support the assertion, "it would be in the interests of all parties if he shared it".

The spokeswoman added: "The new management team and everyone at RBS is fully focused on fixing the company's problems and returning RBS to standalone strength. Only then will we be in a position to repay the support of the taxpayer and all our shareholders."

Meantime, a call was made for RBS to stop further pension payments to Sir Fred Goodwin, its former chief executive, after an ex-employee's claims pointed to "a shocking culture of extravagance and greed at RBS at the expense of savers and shareholders".

Vince Cable, the Liberal Democrats' Treasury spokesman, has written to Chancellor Alistair Darling, and Lord Turner, demanding an immediate halt to payments from Sir Fred's £703,000-a-year pension.

The whistleblower claims the lobby outside Sir Fred's office was redecorated with £1000-a-roll wallpaper, £100,000 was spent on part-time chauffeurs and £5.3m was spent refurbishing a grade-A listed building in Edinburgh for Sir Fred's hospitality use.

Lord Oakeshott, the LibDem Treasury spokesman in the Lords, said: "It looks like the Court of King Fred the First of Scotland with directors and auditors as well-fed lapdogs around the throne."

In a separate development, the UK Government was reported to be planning a £60m bailout of Dunfermline Building Society, one of Scotland's oldest, amid fears it is poised to reveal huge losses, RBS, which in January posted a £24bn loss for 2008, the biggest in UK corporate history, faces another £500m loss through exposure to Cattles, the troubled loans firm.

At Westminster, the Conservatives said the Prime Minister's appointment of Lord Myners, already under fire over Sir Fred's pension, was "fast turning from an embarrassing appointment to a serious liability".

The city minister, tasked by Gordon Brown with clamping down on corporate tax avoidance, was facing questions about a property business he set up in the tax haven of Bermuda.

Lord Myners reportedly earned nearly £200,000 in a year as chairman of Aspen Insurance Holdings. He insisted he had "no continuing interest in or income from" the company.

Financial Services Authority 'bought off by big business', fails to face up to scandal

The Financial Services Authority, one of the pack of 'less than genuine or fully independent' UK regulators, comes in for attack after failing to properly address product salesmen on commission who call themselves 'independent financial advisers'.

Perhaps the FSA didn't want to upset the business as some of it's staff may be looking for jobs in the sector later on ...

The Herald reports :

FSA criticised over advisers’ independence

MARK SMITH, Deputy Business Editor

The Financial Services Authority yesterday came under fire after the influential UK Shareholders Association said it rejected the conclusions of the City watchdog over the so-called independence of independent financial advisors.

In its response to an FSA enquiry earlier this year, UKSA yesterday said that the watchdog "once again fails to face up to the scandal of a system where product salesmen on commission are allowed to describe themselves as independent financial advisers.

"This allows a vast range of expensive and unsuitable financial products to be sold to people who are unaware that what they thought was advice was in fact a selling process."

The FSA has frequently attempted to tackle the problem that consumers appear unwilling to pay for good independent financial advice.

However, UKSA said the emphasis on financial products created by insurance companies and investment institutions within its review is a mistake.

A spokesman said: "The aim should be to help individuals to understand the basic principles of personal financial management, through advice, education and self-help.

"Only by this means can the consumer be put in a position to evaluate whether a product meets his needs."

Earlier this year, Otto Thoresen, chief executive of Aegon UK, was asked by the Treasury to report on how a "generic advice" service might work. His findings are due next year.

An interim report, published in October, emphasises that a widely-available money guidance service should be available for all and "nobody should be turned away", although there should be effective targeting of those most vulnerable to the consequences of poor financial decision-making.

UKSA added that the Thoresen review "continues down this path" but that if the solutions of FSA report "are accepted, the opportunity will have been thrown away"