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Is this the end of the building society sector?

The ongoing demise of the Dunfermline Building Society is obviously going to set alarm bells ringing in the consumer sector, although initially it appears as though many of the society's 250,000 savers have remained loyal. Over the next few days the headlines are likely to be uncomfortable for the building society sector with initial concerns that the Dunfermline Building Society has effectively gone under, as well as the fact that other building societies were unwilling to stump up the cash to save the business.

This is the first building society to go under in the current recession and as such it would be wrong to ring alarm bells too loud. If we see more and more building societies coming out of the woodwork, with suggestions that they are in serious financial trouble, then maybe we need to look again but at this moment in time the Dunfermline seems very much to be a one-off.

The sector has been built on solid foundations and has historically been seen as less risky than the traditional UK banking sector. The fact that other building societies were unwilling to bail out the Dunfermline Building Society is actually a positive note because this would indicate problems at this particular society are unique.

If there was a potential for collapse across the sector then we would need to see significant funding from within the industry and possibly from the government. The building society sector may be battered and bruised for a few days but there would appear to be little long-term damage at this moment in time.

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