London: The British government on Monday announced the nationalisation of troubled lender Bradford & Bingley, the latest European victim of the global financial crisis.
B&B’s savings business, which represents its best assets, will be sold to Spanish bank Santander, while its mortgage book will be nationalised, the Treasury said.
Abbey National, the British bank owned by Santander, will pay £612 million $1.1 million in the deal.
“What you’re seeing is the government is taking quick, decisive action, we’re standing behind the system to stabilise it because to let Bradford & Bingley go down would have destabilised the entire system,” finance minister Alistair Darling told BBC radio. “The government has got to provide stability.”
Bradford & Bingley (B&B) is the second British bank to be nationalised this year after Northern Rock.
The British stock market fell 0.49% on opening Monday, dropping to 5,062.32 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 $700 billion bailout for struggling Wall Street banks in a bid to avert the worst financial crisis since the Great Depression.
The Belgian, Dutch and Luxembourg governments also mobilised to help troubled financial group Fortis on Sunday, agreeing to inject euro11.2 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 prolonged property market downturn.
Bradford & Bingley stock has slumped in recent weeks.
It had announced Thursday that it was cutting 370 jobs, mainly at its mortgage processing centre 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 2008, attributing them to “turbulence in the banking and housing sectors.”
The collapse of B&B, which specialises 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.”
The front-page headline in the Guardian newspaper summed up the reaction of much of the British media: “ Another day, another bailout.”