The only part of Bradford & Bingley that anyone wanted to buy was the branch network and savings side of the business. Following an auction conducted by Morgan Stanley on behalf of HM Treasury, the winner was Abbey, owned by Banco Santander, Spain’s largest bank.
The Tripartite Authorities - the Government, the Financial Services Authority and the Bank of England say that this action protects savers' money by transferring it to Abbey.
The unwanted part of B&B's business - its customer loans and treasury assets, which includes £41 billion of mortgage assets - will be taken under public ownership.
Earlier this year the Banking (Special Provisions) Act 2008 was passed to allow nationalisation of Northern Rock, paving the way for any subsequent bank that needs to be bailed out by the Government.
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.
On Saturday morning the FSA decided that B&B no longer met its threshold conditions for operating as a deposit taker under the Financial Services and Markets Act 2000 and FSA rules.
A statement said: “The Government, on the advice of the FSA and the Bank of England, acted immediately to maintain financial stability and protect depositors, while minimising the exposure to taxpayers. It has worked over the weekend to bring about the part public, part private solution which best meets those objectives.”
Chancellor Alistair Darling said: “We cannot allow problems in financial institutions affect other financial institutions.”
The transfer of the retail deposit book has been backed by cash from HM Treasury and the Financial Services Compensation Scheme.
Date: 28th, September, 2008
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