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Video: £41bn bill as Bradford and Bingley is nationalised
YORKSHIRE'S crisis-hit mortgage lender Bradford & Bingley was today nationalised and a new savings giant created in the latest upheaval for the British banking sector.
The Government has taken B&B's 41 billion loan book on to the public balance sheet and guaranteed around 9 billion in other commitments related to the bank.
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Front-line workers report for duty in Bingley
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Paper money: From demutualisation to nationalisation
Clamour grows to sack B&B boss over bank's loss
Timeline: Bradford and Bingley's year of turmoil
Men of money: Bradford and Bingley's history
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The move follows Northern Rock's nationalisation in February, which has added 87 billion in debt.
B&B's savings business and its branches - with 2.7 million customers and 20 billion in deposits - have been sold to Spanish bank Santander for 612 million.
Santander owns Abbey and recently agreed to buy Alliance & Leicester - so the deal will give it 1,286 branches and a 10% share of the UK retail savings market.
The deal comes just two weeks after a 12.2 billion rescue takeover of Halifax Bank of Scotland was announced.
Today's break-up will mark a dramatic end to a business which can trace its roots back more than 150 years.
The Financial Services Authority (FSA) decided on Saturday morning that B&B was not strong enough to continue as a deposit-taking bank after the recent financial turmoil undermined confidence in the firm.
Chancellor Alistair Darling told GMTV: "My priority was to protect savers and depositors but also to ensure we got a good deal for the taxpayer.
"We had to stabilise the situation in order to protect the banking system as a whole, just as we have done on previous occasions."
The Treasury said it would be "business as usual" for the firm's savers and borrowers.
B&B, which became a bank in 2000, has around 3,000 staff and 197 branches, and was the last former building society to retain its independence after the nationalisation of Northern Rock and July's announced takeover of Alliance & Leicester.
The Financial Services Compensation Scheme has paid out 14 billion - a loan funded by the Bank of England - to allow B&B's retail deposits to be transferred to Abbey.
The Treasury is paying a further 4 billion to cover those deposits not protected by the FSCS - those with savings of more than 35,000 - and will then take on the Bank of England loan.
The Government argues that the risk to the taxpayer is minimal because the loans will be paid back by mortgage redemptions as B&B's lending business is wound down. Virtually all of the lender's loans would have to default for the taxpayer to lose out.
The Treasury's 4 billion will be the first to be paid back, with wholesale deposits next in line and then the 14 billion paid out by the FSCS.
Banks will pay the interest payments on the FSCS loan, with the first 450 million instalment due next autumn.
Any remaining funds could mean some payout to B&B's legion of more than 900,000 shareholders. The lender's shares have been cancelled, with compensation to be paid in "due course", the Treasury said.
Legislation approving the deal is likely to be passed when Parliament returns next week.
Anto Horta-Oso, Abbey's chief executive, said: "This is good news for Bradford & Bingley's savings customers. They can be certain that their hard-earned savings are with a bank they can trust."
But the B&B brand will remain within Santander, which has a total of 60 million customers in more than 40 countries worldwide.
B&B has been squeezed by the credit crunch hiking its funding costs, and the housing market slowdown casting doubt over its main buy-to-let business.
The firm has seen bad debts and arrears soar, lost millions on complex mortgage-backed investments hit by the turmoil, and its investment status downgraded by ratings agencies - making it more expensive for the group to do business.
The lender has also taken an 18 million hit from organised fraudsters hitting the wider buy-to-let sector by gaining bigger mortgages than properties are worth.
The group will continue to be led by chief executive Richard Pym in the initial period of public ownership. Mr Pym succeeded Steven Crawshaw, who stepped down for health reasons in June.
More on next page: Customers and staff fear worst >>
Customers and staff fear worst
As worried staff members turned up for work at the bank's West Yorkshire HQ today, some customers were also heading to Bingley to remove their savings.
Marc Lawrence, who used to work in IT for the bank before being made redundant after 30 years, said he withdrew his money amid fears for the long-term future of the company.
"I worked for Bradford & Bingley for 30 years," he said. "They were a great employer but who knows what might happen.
"I worked damned hard to get the money, I just don't want to see it go down the pan."
After withdrawing his money, Mr Lawrence left the building and walked a short distance across the road to the Skipton Building Society and deposited his money there.
He declined to say how much he was withdrawing, but said it was "substantial" and more than the 35,000 limit which is safeguarded by Government guarantees.
He added: "This is a sad day for the town. I worked for them for 30 years, I am really sorry to see this, they were a great employer."
Another customer, a pensioner who declined to be named, said he was also withdrawing his money.
He said: "I am taking my money out. I have got to worry about myself. I am putting it in a bank where it is safe."
Workers remained good humoured but tight-lipped today as they arrived for work at the HQ.
No-one was prepared to comment on record about the bank's future, though
one worker joked "give us a job" as he arrived this morning.
Another quipped: "I suppose I'll have to learn Spanish now" - a reference to news that the bank's savings and branch business will be bought by Spanish giant Santander.
Remaining anonymous, another employee said: "I don't know what's happening yet. Hopefully we will know a little bit more later today.
"It's worrying, but what can you do?"
Bingley resident Christine Harvey, 47, said news of the bank's financial problems was bad news for the town.
"You have wonder which bank is next," she said. "Every time you switch on the news or read a paper there seems to be a bank in trouble.
"This is a major employer here and it will be devastating for the region if jobs were to go. These are worrying times."
More than 1,000 people work at two B&B sites in Bingley town centre and just outside the town in Crossflats.
Ann Cryer, Labour MP for Keighley, said: "I much prefer nationalisation to instant death - which is what has happened with some of the American banks - and what do you feel if that is your constituency and hundreds of jobs are just gone in minutes?
"It is just a time-keeping measure to ensure jobs. They just have to put it on hold for a bit to ensure all those jobs at Bingley."
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Tuesday 22 May 2012
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