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June 11, 2009

West Bromwich BS in rescue talks

by Gill Montia

Story link: West Bromwich BS in rescue talks

West Bromwich Building Society is in talks with the Treasury, its future in doubt.

Rumours about the lender’s capital strength surfaced in the middle of last month, when the Financial Services Authority was reported to be seeking a bidder for the 160-year-old mutual.

Defaults on commercial and buy-to-let loans plus losses on investments in financial assets are understood to be at the root of its problems.

According to a BBC report, the society could still remain independent if it can strike a deal with its debt holders.

Concerns over UK building societies have been growing since the sudden collapse of Dunfermline in March, although the credit crisis had already seen a number of small societies rescued by their larger rivals.

The sector has come under close scrutiny since Moody’s downgraded the credit ratings of several societies in April.

At the time, West Bromwich’s financial strength rating was cut from C- to E+.

Last week the Financial Services Authority launched a consultation aimed at ensuring that societies with “less traditional” business models have the risk management systems and skills they need.

West Bromwich is the UK’s eighth largest building society with around 350,000 customers, 850 staff and 46 branches.

 

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