The loan books of stricken lender Bradford & Bingley are being taken over by the government in a similar move to that seen earlier this year when another struggling lender, Northern Rock, was taken into public ownership. The government is using the same legislation that was used to nationalise personal loans lender, Northern Rock to rush through the nationalisation of the Bradford & Bingley loans book, which stands at £50 billion, much of which has been lent to buy to let investors.
The savings arm of the Bradford & Bingley has been bought by the high street bank Abbey, which is owned by Spanish bank Santander. The savings account part of the business is valued at £20 billion, and officials have said that savers’ money is safe as it is covered by the Financial Services Compensation Scheme. An official from Abbey said: "They can be certain that their hard-earned savings are with a bank they can trust."
In the meantime the treasury made an announcement stating: "Following recent turbulence in global financial markets, Bradford & Bingley has found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution." The Prime Minister, Gordon Brown, said that the move by the government showed that it would "do whatever it takes to ensure the stability of the UK financial system".
However, after the announcement confirming the nationalisation of the lender was announced bank shares dropped steeply, with the major banks seeing their share values plummet. Barclays, Lloyds TSB, HSBC, and Royal Bank of Scotland were amongst those that saw their share values fall at close of trading following the announcement.