The collapse of Dunfermline Building Society should not dent people’s faith in the mutual movement.

That was the message from Mike Lazenby, chief executive of Chatham-based Kent Reliance Building Society, after the Nationwide took over deposits and prime mortgage loans of the failed Scottish institution.

The Government has pledged taxpayers’ cash to take on Dunfermline’s so-called toxic assets - commercial property lending and sub-prime loans.

Dunfermline’s request for a £30million government loan to tide it over its difficulties - it faced an estimated loss of £26million - was rejected, spelling the end of the 140-year old society, although its name will remain.

Nationwide is taking over £2.4billion in the accounts of around 300,000 savers, 34 branches and retail sites, £1billion of prime mortgage lending book, and all "related employees".

Mr Lazenby said: "It’s a disappointment and setback for the industry but it’s not the end of the world and not a calamitous event such as the Northern Rock crash.

"We were aware that Dunfermline had some issues and there are other building societies with similar issues. But Kent Reliance is having a remarkably good year because we’ve never been involved in sub-prime markets and our commercial exposures are very low."

He added: "I don’t think it’s damaging at all to the building society industry, It shows the strength of the industry. A solution was found very quickly because it was very clear that one had to be found before 9am Monday to avoid people queueing up outside their branches wanting their money back . It avoided the debacle there was over Northern Rock."