Dunfermline collapse 'speeded by £31m IT project'

1 April 2009

The collapse of Scotland's biggest building society, Dunfermline, may have been accelerated by the company's decision to pour £31.4 million ($45 million) into a risky project to develop a mortgage IT system that could be outsourced to other lenders, it has been reported.

According to eWeek Europe, "questions are being asked" regarding the extent to which the loss-making Dunfermline Solutions subsidiary contributed to the eventual failure of Dunfermline.

The building society was rescued over the weekend in a deal that will see Nationwide take on its branches, retail deposits and prime loans, while the Treasury will provide £1.6 billion in financing and acquire the company's toxic debts.

Dunfermline Solutions' mortgage system was developed over five years with the banking software firm Temenos. In a Tenemos case study, Dunfermline director of operations Stewart Cooper said the company had been selected "despite its lack of users in the building society market".

He also described the development of Dunfermline Solutions as a "rollercoaster ride".

According to the Herald newspaper, Dunfermline Solutions lost £5 million - £7.9 million before a tax credit - and ended 2007 with assets of £20.7 million and a deficit of £10.7 million.

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