Struggling B&B 'to be nationalised'

Sep 28 2008

Struggling mortgage lender Bradford & Bingley is hours away from becoming the second UK bank this year to face a humiliating nationalisation.

The company, which has been battered by the credit crunch, is set to follow Northern Rock into public ownership after attempts to sell the business failed.

B&B has been locked in talks with so-called Tripartite Authority - the Treasury, Financial Services Authority (FSA) and the Bank of England - over the potential bail-out.

A formal announcement on the fate of the buy-to-let specialist, which can trace its roots back to 1851, is expected before stock markets open.

B&B, which has 2.5 million customers, held retail deposits of £22.2 billion at the end of June - although the bank rushed to assure savers that their money was safe.

Treasury Chief Secretary Yvette Cooper also told the BBC: "We have been very clear that the priority is to make sure that depositors, that ordinary savers will be properly protected, but also that we can support the stability of the banking system as a whole."

But its army of more than 900,000 shareholders from the former building society's demutualisation in 2000 could be wiped out - with the threat of job cuts among B&B's 3,000 staff.

Parts of the business may be sold on immediately, but the firm's £41.3 billion mortgage book is set to be taken under public ownership - meaning the taxpayer takes on the risk of defaults.

This loan book could also be merged with Northern Rock, which was nationalised in February after becoming the first victim of the credit crunch a year ago.

Members of the Tripartite Authority would only say that discussions over B&B were "ongoing". An FSA spokesman said: "We confirm that the Treasury, FSA and BoE are working closely with B&B to consider the implications for its business of recent financial turmoil."