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B&B nationalisation is confirmed B&B nationalisation is confirmed
(20 minutes later)
Mortgage lender Bradford & Bingley (B&B) is to be nationalised, the government has confirmed.Mortgage lender Bradford & Bingley (B&B) is to be nationalised, the government has confirmed.
Under the arrangement, the government will take control of the bank's £50bn in mortgages and loans. Shares in the company have been suspended. The government will take control of the bank's mortgages and loans, while B&B's £20bn savings business and branches will be bought by Spain's Santander.
B&B's £20bn savings business and branch network will be bought by rival Abbey, which is in turn owned by Spanish banking group Santander. Chancellor Alistair Darling said investors had lost confidence in B&B and the government was moving to stabilise the wider financial sector.
B&B is the latest bank to fall victim to the crisis in the financial sector. He also said that taxpayers were being protected from any B&B losses.
'Lost confidence''Lost confidence'
"Following recent turbulence in global financial markets, Bradford & Bingley has found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution," said the Treasury."Following recent turbulence in global financial markets, Bradford & Bingley has found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution," said the Treasury.
For taxpayers to lose a penny Bradford & Bingley's future losses would have to be unthinkably huge BBC business editor Robert Peston Read Robert Peston's blogQ&A: Bradford & Bingley bail-outFor taxpayers to lose a penny Bradford & Bingley's future losses would have to be unthinkably huge BBC business editor Robert Peston Read Robert Peston's blogQ&A: Bradford & Bingley bail-out
It added that the move would protect savers' money and that B&B's branches, call centres and internet operations would "be open for business as usual to provide continuity of service to customers".It added that the move would protect savers' money and that B&B's branches, call centres and internet operations would "be open for business as usual to provide continuity of service to customers".
BBC business editor Robert Peston said it was a good deal for taxpayers, and that the risk was "quite close to nil".BBC business editor Robert Peston said it was a good deal for taxpayers, and that the risk was "quite close to nil".
Chancellor Alistair Darling told the BBC Radio Four's Today programme that the government had moved to nationalise B&B "to provide the stability" that the UK financial sector needs. Chancellor Alistair Darling told the BBC that the government had moved to nationalise B&B "to provide the stability" that the UK financial sector needs.
Mr Darling added that under B&B's nationalisation, taxpayers were protected from any losses due to the Financial Services Compensation Scheme. Mr Darling added that under B&B's nationalisation, taxpayers were protected from any losses because of the Financial Services Compensation Scheme.
BRADFORD & BINGLEY Founded in 1964Switches from a building society to bank in 2000Employs 2,862 people£400m share issue to raise funds in June is undersubscribedBased in West YorkshireBRADFORD & BINGLEY Founded in 1964Switches from a building society to bank in 2000Employs 2,862 people£400m share issue to raise funds in June is undersubscribedBased in West Yorkshire
This means that if B&B's remaining assets prove insufficient, the balance will ultimately be paid by the wider UK banking sector, although Mr Darling said that possible scenario would be a long way down the line. This means that if B&B's remaining assets prove insufficient, the balance will ultimately be paid by the wider UK banking sector, although Mr Darling said that possible scenario remained a long way down the line.
"We are not going to do that immediately, because in the current climate that would be absolutely daft," said the chancellor."We are not going to do that immediately, because in the current climate that would be absolutely daft," said the chancellor.
"But it does mean that in future, as things get better, if there is a shortfall then we will collect it from the industry.""But it does mean that in future, as things get better, if there is a shortfall then we will collect it from the industry."
Shadow Chancellor George Osborne told the Today programme that he would study the exact details of the deal, but that protecting taxpayers had to be the main priority. Shadow Chancellor George Osborne told the BBC that he would study the exact details of the deal, but that protecting taxpayers had to be the main priority.
'Good news''Good news'
B&B is the second UK bank to be nationalised since the start of the global credit turmoil, following Northern Rock's move into state ownership in February this year.B&B is the second UK bank to be nationalised since the start of the global credit turmoil, following Northern Rock's move into state ownership in February this year.
Speculation had intensified in recent weeks that B&B was approaching a funding crisis, leading to a growing number of customers withdrawing their funds.Speculation had intensified in recent weeks that B&B was approaching a funding crisis, leading to a growing number of customers withdrawing their funds.
B&B got itself into financial difficulty due to the credit crunch sharply increasing the cost of funds it borrowed from the global wholesale money markets. B&B got itself into financial difficulty as a result of the credit crunch removing the option of raising funds through the global wholesale money markets.
Its problems were then further intensified by its over reliance upon the buy-to-let market, which has seen a large rise in bad debts as UK house prices have fallen. Its problems were then further intensified by its focuson the buy-to-let market, which has seen a large rise in bad debts as UK house prices have fallen.
B&B's savings business and branch network will be taken over by Abbey, which is part of Spanish banking group Santander.
Abbey chief executive Antonio Horta-Osorio said the acquisition of B&B's bank's savings account was "good news" for customers.Abbey chief executive Antonio Horta-Osorio said the acquisition of B&B's bank's savings account was "good news" for customers.
"They can be certain that their hard-earned savings are with a bank they can trust.""They can be certain that their hard-earned savings are with a bank they can trust."
An Abbey spokeswoman said while it was "business as usual" for B&B's branches, it was too early to say whether any would close in the long term. A spokeswoman for Abbey said while it was "business as usual" for B&B's branches, it was too early to say whether any would close in the long term.
However, with Santander already owning both Abbey and Alliance & Leicester, it is almost inevitable that there will be some branch closures moving forward. However, with Santander already owning both Abbey and Alliance & Leicester, it appears likely that there will be some branch closures.
Do you have a buy-to-let mortgage with Bradford & Bingley? Are you a B&B investor or shareholder? Send us your comments using the form below:Do you have a buy-to-let mortgage with Bradford & Bingley? Are you a B&B investor or shareholder? Send us your comments using the form below:
In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below.In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below.
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