Posted: Fri Jul 31, 2009 4:09 pm Post subject: Regulator rapped over Dunfermline
Britain's financial regulator has been criticised for failing to warn savers about risks at the Dunfermline Building Society as it headed towards collapse.
MPs on the Scottish Affairs Committee said the Financial Services Authority (FSA) failed in its duty to protect savers and investors.
The committee also accused Dunfermline managers of keeping its members in the dark about risky lending.
The Dunfermline was forced out of business by regulators last March.
Two days later, the branches, the brand and the Fife headquarters were taken over by the Nationwide Building Society.
The UK Government took on £1.6bn of its more risky liabilities.
The MPs said Dunfermline directors did not give a clear picture of their activities to society members who owned it, including more than 350,000 customers.
The report said they "failed to communicate to them that the moves to diversify into the commercial lending business brought higher risks as well as higher returns".
Those risks included a rapid increase in exposure to the commercial real estate market, as well as buy-to-let mortgages.
The Dunfermline had invested heavily in packages of securities that had bundled up loans made by others.
There was also criticism of the Dunfermline management for telling members in the Members' Review there was "excellent progress" in a new computer system when its managers had instead "lost control and allowed spiralling increases in costs".
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