Credit crunch hits church society

The credit crunch reached a church today when it was announced the Presbyterian Mutual Society, with assets of some £300m (€364m), was unable to meet massive demand for withdrawals and was stopping repayments to members.

A run of recent withdrawals meant it no longer had the money to meet demand.

In a statement the society said: “Because of the current exceptional financial circumstances it is unable to meet demand from its shareholders for withdrawal of funds.”

It was consulting its lawyers and financial advisers and had asked the British government to guarantee its funds.

Set up in 1982 to operate for the benefit of its members and the Presbyterian Church in Ireland – although a separate legal entity from the church – it currently has some 9,500 shareholder accounts.

Shareholders have been told they can’t for now have the money – up to £300m (€364m) – they have invested.

At the moment it has about £130m (€157m) in fixed or other assets and £170m (€206m) lent out to borrowers.

Its activities consist of receiving money from shareholders – on which it pays a divided - making loans to churches and private individuals, and making investments in commercial property in England and Scotland from which it derives a rental income.

The society is not covered by the Financial Services Compensation Scheme in the UK, but has made approaches to the British government seeking to have it extended to its shareholders.

It is understood the issue has gone right up to British Prime Minister Gordon Brown, son of a Scottish Presbyterian Minister.