Downing Street Says » Bradford and Bingley

Asked about the events at the weekend, the Prime Minister s Spokesman (PMS) said that it had been clear by close of play on Friday that there were some serious issues in relation to Bradford and Bingley. On his return from Washington the Prime Minister had travelled straight to Downing Street, rather than travelling to Chequers as had been intended, where he had a meeting with Alistair Darling and Treasury officials. Following that meeting the Treasury initiated discussions with relevant institutions and announced the outcome of those discussions this morning.

Asked if the Treasury had been monitoring Bradford and Bingley for some time, the Treasury Spokesman (TS) said that the Treasury and Financial Services Authority (FSA) had been monitoring a range of institutions for some time.

Asked if there were any other institutions we should be worried about, the PMS said that it was not for us to comment on individual institutions.

Put that Bradford and Bingley was one of a range of institutions the Treasury and FSA had been monitoring, the PMS said that it was the job of the FSA to monitor all institutions.

Put that the TS s words had suggested that the Treasury had been keeping an eye on a select few, the TS explained that what he had said was that since last year it had been clear that there had been particular problems in the financial sector and that the FSA, as the regulator, had been monitoring institutions. It was not surprising to hear that one of those institutions was Bradford and Bingley. You would expect there to have been quite a lot of contact between the FSA and Bradford and Bingley in the last few weeks given what had been happening.

Asked if the Prime Minister was still confident that Britain didn t have a sub-prime problem, the PMS said that it was clear that what we were seeing in financial markets at the moment originated in the US sub-prime mortgage market and that that was affecting every major financial sector, not only in the UK but in continental Europe, as we were seeing today.

Put that the two banks that had been nationalised had been engaged in particular lending, the PMS said that they were also two institutions with particular business models. The key point was that we had taken decisive action to deal with the issues in relation to the UK. We had also provided generalised support to the banking system through the Bank of England s special liquidity support system. It was important to emphasise that these issues were not just affecting the UK.

Asked if the Treasury had learnt anything from the Northern Rock incident, the TS said that as a result of Northern Rock the Treasury had put in place some legislation in February and were able to use that legislation to effect the Bradford and Bingley transaction.

Asked if it had required a statutory instrument, the TS said that there had been an order laid and we had used the powers that we had.

Put that the handling seemed to have been much quicker this time, the TS said that we had powers to deal with this particular problem. Recalling the situation with Northern Rock, the TS said that that institution had got into trouble, was not able to fund itself and so went to the Bank of England to seek lender of last resort facility. After that, the Treasury had had no power to direct shareholders. Now we had powers, put in place in February, whereby we were able to take control of the situation.

Asked about the Santander deal, the TS said that we would work through the details of that deal in the coming days. It was reasonably clear that Santander had bought the deposit business of the branches and associated staff would transfer. It had not yet been decided what the arrangements for the remaining assets would be, but in the meantime they would stay in the management of Bradford and Bingley. There was a relatively new chief executive who had recently come in and they would manage those assets.

Asked about the jobs at Bradford and Bingley, the TS said that there were around 3000 jobs in total. Around half of those were associated with the retail deposit business and would now be transferred to Santander. The Chancellor had already said that in relation to the remaining jobs we would provide some certainty for employees for 6 months, but clearly there were some decisions which would have to be taken by the management going forward. The other thing the Chancellor had made clear was that we were working actively with the RDA to consider any repercussions.

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» Monday, September 29, 2008

Bradford and Bingley

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