Yes, the collapse of the Presbyterian Mutual Society in Ireland is still an on-going issue, and no, there is still no definite word of a more favorable outcome… But there is some news to provide hope of a possible positive resolution.

As a reminder, the Presbyterian Mutual Society was a free-standing financial institution in which individuals and congregations in Northern Ireland could deposit funds and the Society used them for loans to churches to help with building and renovation.  While not a part of the Presbyterian Church in Ireland there were very strong ties.  (e.g. It was open only to Presbyterian investors and the original web site was within the PCI web site.) Well, it turns out that the Society also invested in some commercial real estate and when the global economy turned down their balance sheet turned negative, there was a “run on the bank,” and the Society was unable to cover their deposits.  The Society is now “In Administration” and the Administrator is trying to “wind down” the Society in an orderly manner such that as they liquidate real estate they can recover as much of the property value as possible as the economy recovers. For more of the background I wrote about this in November 2008, January 2009, February 2009, another February 2009, and March 2009.  Over the last nine months the issue has not gone away but firm developments have been hard to come by.

One of the things which has drawn a lot of criticism from church leaders, Society investors, and Northern Ireland politicians is that in the financial crisis the British government bailed out virtually every financial institution… except mutual societies.  Over the last nine months there has been work by many people to try to restore the investments in the Society either with government help or with a “white knight.” 

The former has not been too successful yet. The Moderator of the General Assembly of the PCI, the Rt. Rev. Stafford Carson mentions in his blog last June about setting up a working group with the British government on this matter – As of 10 December this Working Group has still not reported, the report being expected last September.  And politicians, some in their end of year messages, are saying that they want to see some progress in 2010.  (The PMS/PCI blog run by investors has been quiet for over a year now.)  UPDATE: Thanks to the comment below for the pointer to the on-going discussion board thread about the situation with the Society.  And thanks for the link back here – but from reading through the board they are way ahead of me.  That seems to be the place for the most up-to-date information.

But the Christmas season did bring hope for a financial resolution and while nothing has been announced, there is recent word that one may be at hand.  Back in November, officials in the PCI offices did confirm that there were three financial institutions that had shown an interest in taking over the Society.  Just before Christmas it was announced by MP Jeffrey Donaldson that talks with one bank were at an “advanced stage.”  He also says that coming to terms for the take-over would depend in part on “the level of government support.”

It is no surprise that this drawn-out resolution has tried the patience of many investors – As one headline says “PMS ‘taking longer than Falklands War.'”  This impatience is not helped by the fact that the Administrator did not get an interim payment out to investors before Christmas as he had hoped (Irish Times), and in fact the payment may be further delayed if High Court approval is necessary.  This results from the manner in which the Society structured deposits with depositors having less than £20,000 being shareholders and those over that amount formally loaning that money to the Society.  While the Society’s rules and the investor adopted wind-down plan would treat everyone equally, under the insolvency laws those who loaned the money would get preferential treatment.  The Administrator has suggested that some loan holders now might try to invoke this preferential repayment.

Finally, possible financial mismanagement that got the Society to this point is still being looked at as well.  The Financial Services Authority looked at their operations last Spring and concluded the Society was “conducting regulated activities without the necessary authorisation or exemption” but they decided they did not have enough information for a successful prosecution.  The Belfast News Letter now reports that “The Department of Enterprise, Trade and Industry (DETI) is stillconsidering action regarding the conduct of directors of thePresbyterian Mutual Society after five months, it has confirmed.”

So while there is clear hope on the horizon for the Society investors it appears that this journey still has several twists and turns to make before they arrive at a clear resolution.  Stay tuned.