The Nationwide is to buy the Dunfermline Building Society branches, good loans and deposits, it has been confirmed.The mutual was put up for sale after incurring losses of £26m.The Nationwide, which will take on the Dunfermline's 530 staff, said the 140-year-old brand would remain intact.

The Treasury will take £1bn of commercial property lending and acquired mortgage debt. Scotland's first minister welcomed the deal.

The agreement with the Nationwide was struck less than 48 hours after the UK Government announced that the building society was to be put on the market.

The Bank of England used new powers under the Banking Act to rush through the deal and prevent the Dunfermline - Scotland's largest building society - from going bust.

The Nationwide has bought the Dunfermline's retail and wholesale deposits, branches, head office and most of its residential mortgage book.

The Bank of England said: "It is business as usual for all customers. Dunfermline's deposit business will continue to operate normally.

"Savers can be assured that their money is safe.

"All of Dunfermline's staff have been transferred to Nationwide."

The Treasury is due to reveal later how much was paid by Nationwide and any taxpayer liability.

Chancellor Alistair Darling had said the Dunfermline would have needed between £60m and £100m to keep it going because of its exposure to risky assets.

But the Treasury said full nationalisation of Dunfermline would not have provided "value for money".

However, the Dunfermline's outgoing chairman, Jim Faulds, had claimed government funding of £20m-£30m would have helped secure its future and dismissed claims the building society had debts linked to the toxic US sub-prime mortgage market.

'Rock solid'

Mr Faulds said he "warmly welcomed" Nationwide's involvement but was "deeply disappointed" that the government did not provide the support needed for the building society to continue as an independent operation.

He said the Nationwide was "a first-class operation" by which existing Dunfermline members would be "well served".

But he added: "What we needed was not capital but access to the liquidity scheme and the Financial Services Authority raised the bar for access to the liquidity scheme.

"We were not asking for money to be given to us. We were asking for a loan, which would have been repaid with interest.
   
I think it's good news that the jobs have been secured within the Dunfermline Building Society as part of the deal
Willie Rennie MP

"We could have serviced a loan of between £20-£30m. That's what we think we needed. It would have been secured against a good property book and a social housing book that's rock solid."

The Scottish Government had offered money to help keep the Dunfermline going, but did not get Treasury approval for the move.

First Minister Alex Salmond said it was great that jobs had been safeguarded, but there were "perplexing" questions over how the society had been treated by the Treasury and the Financial Services Authority.

He said the Dunfermline was not the only building society to declare losses, yet others were continuing to trade.

"The question remains, would it have been better to provide the capital - that we were willing to contribute to - to allow this organisation to retain its proud history?" he said.

But Labour MP John McFall, chairman of the House of Commons Treasury Select Committee, argued that the Dunfermline's bosses were the architects of their own misfortune.

"If Alex Salmond is defending the Dunfermline building society and the directors, he is really defending the indefensible," he said.
Alex Salmond
Mr Salmond said the Dunfermline was not the only society to declare losses

"The directors engaged in reckless decisions that, at the end of the day, threatened the society."

Mr McFall also dismissed the Scottish Government's previous offer of help.

He said: "The Scottish Government, from what I can gather, was talking about £25m.

"The taxpayer is standing behind it to the tune of £1bn.

"The Scottish Government is incapable of putting money like that behind it."

Graham Beale, chief executive of Nationwide, said: "Nationwide is in a unique position, by virtue of its size and financial strength, to provide support to Dunfermline, and we regard it as both responsible and commercially beneficial to undertake this transaction."

Dunfermline's board - including chief executive Jim Willens, who is a former board director of Nationwide - will resign after the deal.

The building society, which has 34 branches, was founded in the Fife town from which it takes its name in 1869.

A protest about the sale took place at the mutual's head office in Dunfermline on Monday morning.

However, the local MP, Liberal Democrat Willie Rennie, welcomed the takeover.

"I think it's good news that the jobs have been secured within the Dunfermline Building Society as part of the Nationwide deal," he said.

"Employees must have been thinking over the weekend about their jobs and future, it's a traumatic experience."