http://news.bbc.co.uk/2/hi/business/7640143.stm
BBC NEWS
Treasury to nationalise B&B bank
* Troubled bank Bradford & Bingley is to be nationalised, the BBC has
learned. *
Officials from the Treasury and the Financial Services Authority (FSA)
have been in talks with executives from the bank in a bid to secure its
future.
BBC business editor Robert Peston says the Treasury will then speedily
sell B&B's 200 branches and its savings business to a bank or number of
banks.
B&B told savers deposits were safe and Treasury minister Yvette Cooper
said they would be "properly protected".
Ms Cooper told the BBC One Politics Show that negotiations were still
ongoing, but the chancellor would make a statement before the markets
opened on Monday.
"We've been very clear that the priority is to make sure that
depositors, that ordinary savers, are properly protected, but also that
we can support the financial stability of the banking system as a whole."
B&B's share price plummeted to a record low last week.
* 'Great shame' *
Bank spokesman Tony McGarahan said: "We can assure customers that their
deposits are safe with Bradford and Bingley."
The British Bankers Association is unhappy at some aspects of the plan.
Association chief executive Angela Knight told BBC Five Live she was not
happy the taxpayer was having to take on the liability of B&B as well as
Northern Rock.
"The financial services industry underpins, not just the UK economy, but
indeed all of us individually, and there can be times where authorities
have to step in," she said.
She said it was a "very great shame that it's got to this place".
Please turn on JavaScript. Media requires JavaScript to play. But our
business editor said B&B was getting "perilously close to a funding
crisis... there had to be a solution".
Conservative leader David Cameron said nationalisation should be a last
resort. He told the BBC the Tories would not sign "blank cheques" for
the taxpayer to bail out failing institutions.
But John McFall, chairman of the Commons Treasury Select Committee, told
the BBC: "We have to make a decision - do we take it [B&B] into the
state, or do we play Russian roulette with people's jobs and homes?
"I know what I'd prefer."
* Loans nationalised *
B&B's share price has plummeted and it has announced plans to cut 370
jobs due to a downturn in the mortgage market.
A year ago its share price was 300 pence, but has now sunk to 20 pence.
============
HAVE YOUR SAY
* Why don't they have the sense to nationalise the things that matter -
Water, Electricity, Gas, Railways etc, etc *
Colin, Plymouth, UK
=============
The bank will be nationalised using special legislation the Treasury put
through when it took Northern Rock into public ownership earlier this year.
Possible buyers interested in acquiring parts of B&B could include
Santander of Spain, HSBC and Barclays.
Santander, which already owns Abbey and Alliance & Leicester, has been
looking at B&B for some time.
=============
*The nationalisation and break up of Bradford & Bingley will represent
a momentous event in the history of British banking *
Robert Peston
=========
B&B's £50bn of loans, including £41bn of home mortgages, will not be
sold and will be nationalised on a long-term basis. The mortgages may be
given to the nationalised Northern Rock to manage.
"The Bradford and Bingley mortgage book is a lower quality book of
mortgages, it is a worse asset than Northern Rock," said Charlie Parker,
of Citywire.
"It has experienced double the arrears rates of other lenders."
The bank experienced significant withdrawals of cash from its branches
and online bank on Saturday amid customer concerns about its situation.
* 'Less vulnerable *
Our business correspondent said the nationalisation of Bradford and
Bingley "should be the last of the banking accidents here".
He said there was a class of bank that had relied heavily on the
mortgage market - Northern Rock, HBOS, and B&B - and which had now
either been nationalised or taken over.
"The remaining banks have much broader bases, they are less vulnerable,"
he added.
However, B&B's shareholders and holders of its subordinated debt may
lose out.
Our business editor says the nationalisation and break-up of B&B
represents a momentous event in British banking.
=========
* We can assure customers that their deposits are safe with Bradford &
Bingley *
Tony McGarahan
Bradford & Bingley spokesman
============
He said: "It will mean that every building society that floated on the
stock market in the wave of demutualisations of the past two decades
will either have collapsed or been sold to a conventional bank."
B&B was close to seeing a demand from depositors for the return of
billions of pounds, which it would have been unable to find.
Credit rating agencies had been downgrading the rating of its covered
bonds, a form of funding which involves packaging up mortgages for sale
to investors.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7640143.stm
Published: 2008/09/28 12:24:11 GMT
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