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Will the Chelsea building society fall to a rival?

As the ongoing fallout from the £41 million alleged mortgage fraud which was discovered by the company's auditors continues, there is a feeling that the Chelsea building society's days of independence could be numbered. A new management board has been parachuted in to assess the situation and while in public they are talking about a reorganisation of the business and a return to grassroots, many believe this may not be possible in the current environment.

The new management team has effectively ruled out a West Bromwich building society style refinancing, which brought in a number of third-party investors at the expense of mutual customers. However, there are still various escape routes available although there is no doubt that the society is potentially at the beck and call of would-be predators, at least in the short term.

Many experts will point to the historical financial constraints which differentiated the mutual sector from the general UK banking sector. However, these were changed a few years ago and effectively opened up an array of new financing avenues for mutual societies. However, the change in fundraising options has led to significantly more debt across the board and ultimately a risk reward ratio which has recently tipped in favour of risk.

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