Sunday, 29 March 2009

The global financial crisis comes to Dunfermline

Another UK financial institution goes down in flames. The Dunfermline Building Society is busted. The society is up for sale as it emerged that it had run up a multi-million pound loss.

The UK banking crisis seems to have very strong Scottish theme; RBS, HBOS and now the Dunfermline. True, Northern Rock and the Bradford and Bingley weren't Scottish, but they were geographically speaking, close to Scotland.

At first glance, this appears to be a banal point. However, upon reflection, perhaps there is something in it. Could it be that regional banks felt the need to take on excessive risk to compete with larger banks based in London?

In an interview with the BBC, the Secretary of State for Scotland, Jim Murphy said subprime and excessive exposure to commercial real estate brought the Dunfermline down. Why did it feel compelled to make such dubious investments? Did the management understand the risks when it bought into the absurd US housing bubble? Subprime seems a long way from Scotland.

The same question always arises: why didn't the FSA stop institutions like the Dunfermline from taking such appalling risks? We have yet to hear an answer.


Anonymous said...

How would have Scotland fared if it was independent? Who would have bailed out those Scottish banks?

Anonymous said...

How would have Scotland fared if it was independent? Who would have bailed out those Scottish banks?

dearieme said...

I gather that HBOS was run by the Haliban rather than the Scots, but that still leaves RBS and the Dunf. One of the reasons for the (previous) flourishing of the Scottish financial outfits - banks, investment trusts and insurers - was the widespread assumption that everyone in The City was a crook so that you were wiser to have your money with the Presbyterians. So you can blame the present state of affairs either on the decline of religion, or the Anglicisation of the Scots. For the latter, I'd blame the BBC - they were the buggers who introduced that festival of greed known as Christmas into the Scottish way of life.

Alice Cook said...


So it was christmas that caused the crisis.


Patrick Crozier said...

On the question of why the FSA didn't stop it haven't we heard the answer from the lip of Adair Turner himself?

Didn't he say, a few weeks ago, to a HoC select committee that if they'd tried to regulate during the boom years they'd simply have been stopped in their tracks by the government?

Anonymous said...
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dearieme said...

Dear Alice, of course it was Christmas that caused the crisis. The whole bubble has been one long Christmas, hasn't it? Now we're facing a very long Boxing Day.

A_Zimbo said...

So Jim Murphy says sub-prime was the cause. Shows how much that asshole knows. I think you'll find the CEO of Dunfermiline might have something else to say about it. Anybody catch him on Channel 4 news last night?

a former dunfie employee said...

Why didn't the FSA act? Because if you look at the Dunfie website you'll find all the hogwash about their BASEL II compliance and risk management.

Dunfie wrote it up, they published it, FSA box ticked!