Sunday, January 18, 2009

PMS :: the UK financial scandal that isn’t embarrassing enough to cajole the UK government into action

Presbyterian Mutual Society (PMS) logo

A couple of posts in November 2008 passed comment on the Presbyterian Mutual Society debacle. In some ways things have moved on since then, and in others they haven’t.

The administrator has now written to PMS members asking them to vote on his proposal to slowly run down the PMS to maximise return on investments (and perhaps leave it running as a going concern), rather than a fast winding up that would definitely undervalue the society’s assets (commercial property).

The main factor that caused PMS members to forget mutuality and seek to withdraw their investments was the government’s move to guarantee investments in other unstable mainstream financial institutions. If PMS had been run under the watchful eye of the Financial Services Authority (FSA), then it would have been covered by the guarantee and not left vulnerable.

So after initial murmurings and letter-writing, at last the NI Executive seems to have turned its full attention to the matter, with (Presbyterian) Sir Reg Empey suggestion on the Nolan Show last week that the First and Deputy First Ministers would now be taking their appeal for fairness to Gordon Brown in a face-to-face meeting.

But it seems strange that the national press and media haven’t really picked up the story of perhaps the only UK financial institution that is being allowed to fail in this crisis. Even UK investors in Icelandic banks (somewhat outside the FSA’s normal remit) were rescued by the UK government. Yet PMS is only failing due to the UK government’s protection of other institutions.

Despite this, the plight of PMS barely gets a column inch in the national press, and doesn’t get an airing (that I’ve discovered) on financial programmes like Radio 5 live’s Wake up to Money or BBC Two’s Working Lunch.

But while the story just smokes in the corner, there’s no embarrassment for the government and no impetus for action. (Mere moral obligation doesn’t seem to be a motivator.)

Update - Monday 19 January - there's a petition running on the 10 Downing Street website calling on the Prime Minister to "provide similar governmental guarantees to UK mutual societies as for banks" which you can sign online if you agree with the statement.

4 comments:

Timothy Belmont said...

It is a most unfortunate situation for all those affected. I can only think that it must be devastating if any investors were reliant on a n income.

Have we any idea of how much, on average, every member has, or is likely to, lose? Presumably it ranges from small investors with several hundred pounds upwards.

Tim

John Self said...

I was wondering how much the losses are likely to be too.

AiB: "But it seems strange that the national press and media haven’t really picked up the story of perhaps the only UK financial institution that is being allowed to fail in this crisis."

Unless of course there are dozens of other such institutions around the UK in the same state, but we haven't heard about them because they too haven't made national headlines.

Timothy Belmont said...

"Unless of course there are dozens of other such institutions around the UK in the same state, but we haven't heard about them because they too haven't made national headlines."

That crossed my mind, too. Perhaps there are dozens of such cases merely getting headlines in the local media.

Tim

Anonymous said...

Why should the public, via the Government be asked to bail out what was in essence a private savings club for the exclusive use of the Presbyterian Church and its followers? It suited everyone in it to remain outside the fold of the more legitimate banks and building societies while everything in the garden was rosey. It was exactly this attitude which allowed their own leaders to get their own cash out as early as possible, leaving the rest to suffer. Perhaps the Church itself should take some responsibility for what was done in its own name, and only after that has happened should the Government be asked to act.