The British government announced yesterday the nationalization of troubled lender Bradford & Bingley, the latest European victim of the fast-moving global financial crisis.
B&B’s savings business — its best asset with £20 billion (US$36 billion) in savings and 2.7 million customers — will be sold to Spanish bank Santander, while its mortgage book will be nationalized, the Treasury said.
Abbey National, the British bank owned by Santander, will pay £612 million in the deal.
PHOTO: AFP
“What you’re seeing is the government taking quick, decisive action, we’re standing behind the system to stabilize it because to let Bradford & Bingley go down would have destabilized the entire system,” British Chancellor of the Exchequer Alistair Darling told BBC radio. “The government has got to provide stability.”
Bradford & Bingley is the second British bank to be nationalized this year, after Northern Rock in February.
The FTSE 100 stock market in London plunged 2.63 percent in early morning trade, falling to 4,954.11 points as investors digested the deal as well as a massive bailout of Wall Street in the US.
Hours before the deal was confirmed, US lawmakers agreed on the details of an unprecedented US$700 billion bailout for struggling Wall Street banks in a bid to avert the worst financial crisis since the 1930s Great Depression.
The Belgian, Dutch and Luxembourg governments also mobilized to help troubled financial group Fortis on Sunday, agreeing to inject 11.2 billion euros (US$16 billion), Belgian Prime Minister Yves Leterme said.
In Britain over the weekend, officials from the Treasury, the Financial Services Authority watchdog and the Bank of England met to try to secure the future of B&B, which has also suffered from a property market downturn.
Anto Horta-Oso, Abbey National’s chief executive, said the deal was “good news” for B&B’s savings customers, adding: “They can be certain that their hard-earned savings are with a bank they can trust.”
Bradford & Bingley stock has slumped in recent weeks.
It had announced on Thursday that it was cutting 370 jobs, mainly at its mortgage processing center near London, in a bid to save £15 million. The bank employs about 3,200 staff.
Last month, it revealed net losses of £17.2 million for the first half of this year, attributing them to “turbulence in the banking and housing sectors.”
The collapse of B&B, which specializes in mortgages for investors buying homes in order to rent them out, came after HBOS was bought by rival Lloyds TSB earlier this month.
The move has been opposed by the main opposition Conservatives, whose finance spokesman George Osborne told BBC radio: “Our principle is clear — you need to protect the taxpayer.”
Darling, though, insisted that there was no alternative to the deal.
“It’s very easy to say that somehow it could all have been sorted out differently,” he told BBC radio.
“But to pretend that somehow there was some other solution, unnamed, unspecified, it seems to me to be clutching at straws,” he said.
“I’m very clear: you need to take decisive action and that’s what we’ve done,” Darling said.
The front-page headline in the Guardian newspaper summed up the reaction of much of the British media: “Another day, another bailout.”
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