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Brussels, 1st October 2008

State aid: Commission approves UK rescue aid package for Bradford & Bingley

The European Commission has authorised, under EC Treaty state aid rules, the UK authorities' package of measures designed to ensure financial stability, protect retail depositors and support the orderly winding down of Bradford & Bingley, the UK mortgage bank. The Commission was in contact with the UK authorities over the week-end to support in the design of measures that could comply with competition rules. It received a formal notification on 30 September, and was able to decide within 24 hours that the state aid measures comply with EU rules on rescue aid. The UK authorities have committed to submit a restructuring and/or liquidation plan within six months, which will be examined by the Commission under its rules on restructuring aid.

EU Competition Commissioner Neelie Kroes said: "This case shows again that, with good cooperation from the Member State concerned, the Commission can move extremely quickly to provide legal certainty for rescue measures. It demonstrates that state aid control is not an obstacle to protecting the interests of depositors and promoting financial stability. I look forward to continuing to work closely with the UK authorities during any discussions on the future of Bradford & Bingley."

Bradford and Bingley is a UK-based financial institution, which provides specialist mortgages and savings products. As of 31.12.2007, it had a balance-sheet total of £52 billion (approximately €65.7 billion). It operated 197 branches and 141 agencies spread across the UK and organised in four operational regions. Its market share of net new mortgage lending at the end of the 2007 was 7.7%.

By September 2008, the bank had fallen into difficulties and its licence to accept deposits was withdrawn by the UK Financial Services Authority. On 29 September 2008, following close cooperation with the Commission during the preceding days, the UK communicated the details of the measures taken and formally notified on 30 September. These measures include the nationalisation and winding down of the bank, the sale of Bradford & Bingley's retail deposit book and branches along with a matching cash element to Abbey National, the provision of a working capital facility and guarantee arrangements.

The Commission's assessment of these measures found that the state funding to enable the sale of the deposit book provided a state aid to Bradford & Bingley and to its retail deposit business that was sold. The Commission also concluded that the working capital facility and the guarantee arrangements provided by HM Treasury to Bradford & Bingley constitute state aid.

On the other hand, the Commission found that the buyer of Bradford & Bingley's retail deposit business received no aid, as it paid the market price. In addition the Commission is not concerned by potential advantages that these measures may have procured to Bradford and Bingley's retail depositors, as aid to individuals is outside the scope of the EU state aid rules.

The measures described can be authorised as rescue aid in line with the EU Guidelines on state aid for rescuing and restructuring or liquidating firms in difficulty. Under these rules, rescue aid must be given in the form of loans or guarantees lasting no more than six months, except when structural measures are urgently required, which was the case for Bradford & Bingley.

Moreover, the UK authorities have given a commitment to submit a restructuring plan for Bradford & Bingley to the Commission by 29 March 2009.


Events in September 2008, in the context of the ongoing financial turmoil, had a serious impact on Bradford & Bingley's liquidity position. It was downgraded by the major ratings agencies, which made it difficult for the company to refinance itself. On 27 September 2008, the Financial Services Authority determined that it was failing to satisfy the threshold conditions for authorisation under the Financial Services and Markets Act and that its permission to accept deposits would be withdrawn, effectively closing the bank down.

In response to these events, the bank was nationalised. In a series of measures designed to protect retail depositors and ensure financial stability, its retail deposit book, along with a matching cash amount provided by the deposit insurance fund (the FSCS) and HM Treasury, and also including the bank's branches, was sold to Abbey National after a competitive bidding process. HM Treasury intends to wind down the remainder of the bank. In order to ensure an orderly winding down process, it has provided a working capital facility as well as guarantee arrangements to the remaining Bradford & Bingley. The FSCS and the Treasury replace the retail depositors of Bradford & Bingley as creditors in the liquidation process. After discussions with the Commission, the UK outlined the measures taken via a publication on the HM Treasury website on 29 September 2008. It formally notified the measures to the Commission on 30 September 2008.

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