The global financial crisis comes to Dunfermline

Another UK financial institution goes down in flames. The Dunfermline Building Society is busted. The society is up for sale as it emerged that it had run up a multi-million pound loss.

The UK banking crisis seems to have very strong Scottish theme; RBS, HBOS and now the Dunfermline. True, Northern Rock and the Bradford and Bingley weren't Scottish, but they were geographically speaking, close to Scotland.

At first glance, this appears to be a banal point. However, upon reflection, perhaps there is something in it. Could it be that regional banks felt the need to take on excessive risk to compete with larger banks based in London?

In an interview with the BBC, the Secretary of State for Scotland, Jim Murphy said subprime and excessive exposure to commercial real estate brought the Dunfermline down. Why did it feel compelled to make such dubious investments? Did the management understand the risks when it bought into the absurd US housing bubble? Subprime seems a long way from Scotland.

The same question always arises: why didn't the FSA stop institutions like the Dunfermline from taking such appalling risks? We have yet to hear an answer.