British bank nationalised as US credit crunch spreads
By Dipankar De Sarkar
London, Sep 29 (IANS) The British government announced Monday
it will nationalise buy-to-let mortgage lender Bradford &
Bingley in a 42 billion pound bailout as the American credit
crunch began spreading in Europe.
The government said it will take control of Bradford &
Bingley's 42 billion pound mortgages and loans, while its
estimated 21 billion pound savings unit and branches are to
be bought by the Spanish bank Santander - for a reported sum
of around 600 million pounds.
“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,” said the Treasury
Elsewhere in Europe, the governments of Belgium, the Netherlands
and Luxembourg announced a $16 billion bailout for the Benelux
financial and insurance service provider Fortis NV - one of
Europe's top 20 banks.
The part nationalisation of the banking giant came after investor
confidence in the bank disappeared last week.
In Germany, the country's second biggest commercial property
lender, Hypo Real Estate Holding AG, calmed nerves by announcing
Monday it had secured a multibillion euro line of credit from
The German finance minister and banking regulator held urgent
talks with the company at the weekend after its stocks plunged
In Britain, Prime Minister Gordon Brown said the state takeover
of Brandford & Bingley would preserve financial stability,
adding, “We will work night and day to make sure that Britain
can come through fairly this downturn.”
The nationalisation - a rare instrument of intervention in
market-friendly Britain - is the second since the government
took over Northern Rock, a bank that too was hit by the credit
crunch, in February.
Earlier this month, the government brokered the private takeover
of Halifax Bank of Scotland (HBOS), Britain's largest mortgage
lender, by rivals Lloyds TSB.
The plan to nationalise Bradford & Bingley was reportedly
agreed at a meeting between Brown and his Chancellor of the
Exchequer (finance minister) Alistair Darling Saturday after
the bank suffered from a lack of confidence in recent weeks,
with shares falling more than 93 percent in the past 12 months.
While it is said to have enough liquidity to tide it well
into the next year, analysts said the bank's problems were
mainly the result of its focus on lending money for the buy-to-let
property market, which has seen a large rise in bad debts
as British house prices have fallen.
The government said that under the nationalisation model it
is following, the taxpayer will be protected because any losses
would be borne by the wider banking industry under a government
But the opposition Conservative Party, which is leading ruling
Labour by 19 points in opinion polls, came out against the
nationalisation, saying the cost would ultimately be borne
by the taxpayer.
The party's shadow finance minister George Osborne said instead
of nationalising the government should place the bank in a
“special resolution regime” under which Britain's central
bank would run the bank down.
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