Chelsea Have Done It Again.

1st September 09 – Chelsea have done it again

In the early days of this diary, I wrote a scathing piece on the Chelsea Building Society. It was triggered following my research into the revelation that Chelsea was amongst those who had done business with the Icelandic banks. Remember that it was the lack of standards within the Icelandic financial system that was one of the first stories to break once the era of credit crunch had dawned.

My interest was personal having a good sized deposit with them. I pawed them on a number of fronts:-

• The Icelandic escapade

• Turning to the wholesale money market in hot pursuit of Northern Rock

• Suffering substantial write-downs

• Having to pay exceptionally high rates to attract new deposit money

• Paying the directors bucket loads of dosh

• Not being in, or anywhere near, Chelsea.

What I didn’t know at the time, since it has only just been uncovered following a review by accountants KPMG, was that the Chelsea has been hit by an alleged fraud during the period 2006 to 2008. Stuart Bernau, the new Chairman, has said “Obviously it’s criminal activity. We have insurance and will try to recover what we can but I’d rather we were up front with the charge.”

In the six months to the end of June 09, the society reported a £26m loss. The main cause of this loss was a bad debt charge of £53m and the main part of that arose from its buy-to-let book where the mortgage fraud is suspected to have occurred. Mr Bernau stressed that there is no suggestion that any Chelsea employee committed fraud, but did admit to “questions about our lending policies.”

Just a few weeks ago, my one-year bond with Chelsea matured having paid out 6.75%. A staggering rate of interest in the current climate. I declined the offer to renew and placed the cash elsewhere.

One other thing I did not know earlier is that the society was founded in 1875 as the Camberwell and South London Building Society. I bet the Victorians felt comfortable with that working-class sounding solid name that would lend out from the deposits it had taken. Thinking about the founding fathers, the words “turning” and “grave” spring to mind.