B&B Nationalisation to Go Ahead

Bradford & Bingley became the latest widely-expected victim of the credit crunch following a deal that sees Spanish bank Santander buy its £21bn deposit book and branch network for £612m.

The Treasury said that the FSA had determined on Saturday that the mortgage lender no longer met its regulatory requirements. Bidders were invited and the Santander deal thrashed out over the rest of the weekend. The Government will take on B&B’s £41bn toxic mortgage book, where risky buy-to-let and self-certified mortgages have been the group’s undoing.

Under the terms of B&B's nationalisation, taxpayers are protected from any losses by the Financial Services Compensation Scheme. If B&B’s remaining assets do not cover its liabilities, any balance will be paid by the wider banking sector rather than the UK taxpayer. The move should protect savers’ money and B&B operations should continue as normal.

The bank’s senior management will remain in place for the first phase of the nationalisation. The B&B business will ultimately be combined with that of Abbey, which is also owned by Santander, but no further plans were revealed.

The shares were suspended at 20p, a tenth of their value six months ago. The bank has struggled with rising arrears in its poor quality loan book and has long been touted as the next potential banking failure. This deal is relatively neat and appears to safeguard savers without exposing the taxpayer unduly, though there will inevitably be some carping about Santander walking off with the best assets and leaving the UK Government with the rump.

This article originally appeared on Hemscott.com. Morningstar and Hemscott are now one company. You can see the original version of this article on the Hemscott web site.