David Prosser: Dunfermline has no cause for complaint

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The Independent Online

Outlook The Financial Services Authority is not popular with MPs, taking regular beatings from the Treasury Select Committee, and now the Scottish Affairs Committee is getting in on the act. It berates the regulator for failing to properly supervise Dunfermline Building Society, for which misadventures in commercial property culminated in an enforced rescue takeover by Nationwide.

MPs side with Dunfermline's version of its relationship with the FSA. The regulator says it repeatedly cautioned the society about the risks involved in commercial property, a claim denied by Dunfermline, with support yesterday from MPs, who pointed out that the FSA's warnings were addressed to the whole industry, rather than specific institutions.

The carping is a bit rich. Dunfermline's management team shouldn't have needed the FSA to warn it of the risks it was taking. It was the society's executives who decided to chase return by betting on the commercial property sector. And they managed to lose £9m on a duff IT overhaul at the same time.

Moreover, once the gravity of Dunfermline's situation became apparent, the FSA acted speedily and decisively to ensure savers didn't lose out. The board of Dunfermline may feel peeved they weren't allowed to have a crack at staying independent, but the FSA's duty is to depositors, a duty it discharged responsibly.

The case was the first test of the special resolution powers given to regulators in the wake of the credit crunch, enabling them to intervene in failing banks and building societies very quickly. The regime seems to have worked – Dunfermline complains it wasn't kept properly informed about the process, but an orderly transfer of business was conducted quickly and without danger to customers.