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State aid: Commission approves liquidation of Bradford & Bingley

Commission Européenne - IP/10/47   25/01/2010

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IP/10/47

Brussels, 25 th January 2010

State aid: Commission approves liquidation of Bradford & Bingley

The European Commission has approved under EU state aid rules UK Government measures granted for the liquidation of Bradford & Bingley. Following Bradford & Bingley's split-up and nationalisation of the part containing the impaired assets in 2008, the UK authorities notified a liquidation plan for the bank. The Commission has authorised the measures, because they are appropriate and necessary for an orderly winding down of the bank while taking into account the necessity to preserve the confidence of creditors in the financial system and remedy a serious disturbance of the UK economy. The Commission therefore concluded that the plan is compatible with Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU), that allows aid to remedy a serious disturbance in a Member State's economy.

Competition Comm issioner Neelie Kroes said "The Bradford & Bingley decision illustrates once again the positive contribution of EU state aid policy to ensuring orderly and effective solutions to tackle the financial crisis. The UK authorities' market-oriented solution has avoided any disproportionate distortions of competition while enabling the preservation of the viable parts of the business."

The decision in the case of Bradford & Bingley, together with the decision taken on Dunfermline (see IP/10/48), is closing the chapter of UK bank restructuring prompted by State aid in the context of the financial crisis.

Bradford and Bingley provide d specialist mortgages and savings products. It operated 197 branches and 141 agencies spread across the UK. 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 due to its dependence on wholesale funding and its risky loan portfolio, which resulted in the withdrawal of its licence to accept deposits by the UK Financial Services Authority. The UK authorities decided to nationalise and wind down the bank while it was still solvent, sell its retail deposit book and branches to Abbey National and provide the remaining part of the business with a working capital facility and guarantee arrangements. These measures were authorised by the Commission as rescue aid on 1 October 2008 (see IP/08/1437) , under which the UK was obliged to submit liquidation or restructuring plan for Bradford & Bingley.

The liquidation plan submitted by the UK foresees a prolongation of the rescue measures previously authorised, which are now extended for the liquidation of the bank, and a potential capital injection.

The Commission concluded that the liquidation plan ensures an orderly winding down of Bradford & Bingley in a manner which maintains financial stability. The liquidation period covers more that 10 years. However, once the bank is no longer active in the market, competitive distortions are limited. The wind-down can be accelerated by a sale of the remaining assets when market conditions improve.

Bradford & Bingley is no longer active on the market. However, the Commission accepted that in order to facilitate the orderly wind-down of its portfolio, it will continue offering limited services to its existing clients. In the same vein, Bradford & Bingley will relinquish or limit any regulatory permission that is not required for the orderly wind-down of the business.

The Commission will strictly monitor the progress of the wind-down process and its impact on competition.

The non-confidential version of the decision will be made available under the case number N 194/2009 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News .


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