http://www.iht.com/articles/2008/10/01/business/01bradford.php
BRUSSELS: European Union regulators on Wednesday cleared the British government's rescue of mortgage lender Bradford & Bingley, saying it did not violate rules on government aid to companies. "The measures described can be authorized as rescue aid in line with the EU guidelines on state aid for rescuing and restructuring or liquidating firms in difficulty," the European Commission said in a statement. The British government on Monday said it was taking over Bradford & Bingley's £50 billion, or $89 billion, mortgage and loan books as turmoil from the U.S. credit crisis spread across Europe. Prime Minister Gordon Brown said the move was needed to stabilize the financial system. EU regulators need to approve government aid to companies and the Commission moved fast to clear the deal. The British government also paid out £18 billion to facilitate the sale of Bradford & Bingley's savings business, including its entire retail branch network, to Banco Santander of Spain. Santander, the second largest bank in Europe, said it will be paying £612 million for Bradford & Bingley's 197 branches and £20 billion of deposits. Bradford & Bingley was the third major British bank to run into trouble since credit crunch began just over a year ago. Northern Rock was nationalized in February, and HBOS sold itself to Lloyds TSB Group on Sept. 18, to stem a sharply falling share price. The EU said the state funding to enable the sale of Bradford & Bingley's deposit book and the working capital and guarantee arrangements represented state aid, but it could be permitted under EU rules allowing for urgent structural measures. The regulators found that Santander had not received any state aid as it had paid the market price for Bradford & Bingley's retail deposit business. The EU said British authorities had promised to give them a restructuring plan for Bradford & Bingley by March 29. Bradford & Bingley was particularly vulnerable to the credit crunch because it specializes in buy-to-let mortgages. Rising mortgage rates mean that investors who took out loans to buy properties for renting out are no longer able to cover their mortgages repayments with their rental income, and many are defaulting on the loans, especially the 17 percent of Bradford & Bingley borrowers whose incomes had not been verified by the bank. --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
