Just a quick update on a story we posted yesterday.
The West Brom Building Society was in danger of becoming the latest government-owned failure following its recent £50 million loss. But at the last minute the society managed to come to some sort of deal with its debt-holders which will mean it can carry on regardless – there should be no changes for customers or staff.
The interesting thing about this deal is that the society will swap the debt for equity under a new FSA-approved scheme called “Profit Participating Deferred Shares”. Stay awake at the back.
As a mutual this should have been a decision that was decided by its members. Except as we now know “normal” rules no longer apply.
It’s a decision that could have been quite controversial, but as it has secured the future of the society, its unlikely to be questioned too vehemently. Indeed there are likely to be other building societies with their hands up asking for a similar help, without the need to consult their members.
Robert Peston looks at the deal in more detail.