Treasury put out three announcements on 29 September about Bradford & Bingley. Key aspects of the rescue include:

  • FSA determined on 27 September that the firm no longer met its threshold conditions for operating as a deposit taker under FSMA and FSA rules;
  • Treasury made an Order under the Banking (Special Provisions) Act 2008 to transfer the firm’s UK and Isle of Man retail deposit business and its branch network to Abbey National plc, following a competitive auction process. The remaining assets and liabilities of the firm (including its mortgage book, personal loan book, treasury assets and its wholesale liabilities) will be taken into public ownership;
  • Treasury and FSCS will recover payments in the wind-down of the remainder of the firm;
  • the Government has put in place guarantee arrangements for six months to safeguard certain wholesale borrowings and deposits with the firm. It plans to seek state aid approval from the European Commission to extend these guarantee arrangements as part of the restructuring of the firm;
  • under the Transfer Order, the FSCS has paid out approximately £14bn to enable retail deposits held in the firm and covered by the FSCS to be transferred to Abbey. Treasury has made a payment to Abbey for retail deposit amounts not covered by the FSCS, amounting to around £4bn, to be transferred to Abbey. In return, FSCS and Treasury have acquired rights in respect of the proceeds of the wind-down and realisation of the assets of the remaining business of the firm;
  • FSCS has financed its payout through a short-term loan from the Bank of England, which will be replaced with a loan from the Government;
  • Treasury will ensure that unsecured and unsubordinated wholesale deposits and unsecured and unsubordinated wholesale borrowings existing as at midnight on 28 September 2008 and any accumulated interest on them will be repaid when falling due. The guarantee arrangements also cover unsecured swap and other derivative contracts entered into by the firm existing at that time;
  • in respect of all secured derivatives and all wholesale borrowings which are secured and which are existing at the relevant time, Treasury will guarantee the payment obligations to the extent that those obligations exceed the available proceeds of the realised security for the relevant derivative or borrowing;
  • where the firm or its counterparty may lawfully set off amounts owed by the firm against amounts owed by the counterparty to the firm or is entitled for any other reason to exercise rights of set-off or similar rights, payments under the guarantee arrangements will be of the net amount;
  • the guarantee arrangements will cover all relevant unsubordinated borrowings from and wholesale deposits with Bradford & Bingley made by Bradford & Bingley International Limited (Bradford & Bingley’s Isle of Man subsidiary), and any other unsubordinated debt due from Bradford & Bingley to Bradford & Bingley International Limited;
  • the scope of the guarantee arrangements means they will not extend to, amongst others, the following liabilities of the firm or its group:
    • covered bonds;
    • securities issued pursuant to the firm’s securitisation programme;
    • subordinated or other hybrid capital instruments;
    • liabilities owed by the firm to its subsidiary companies, except the ones to Bradford & Bingley International Limited mentioned above;
    • any retail and wholesale deposits with and wholesale borrowing by or other liabilities (including liabilities pursuant to swap or other derivative transactions) of the firm’s subsidiaries;
    • liabilities of the firm which are not in respect of borrowing or financial indebtedness, for example trade creditors, salary payments to employees and tax liabilities; and
    • liabilities owed by the firm to FSCS.