Nationalisation of mortgage business and sale to Santander will safeguard customers' savings
The Treasury has announced the nationalisation of Bradford & Bingley's mortgage business.
Under the government's bailout plan for the beleaguered bank, the retail arm will be sold to Spanish bank Santander for £600m, safeguarding customers' savings.
In the plans, announced by the chancellor, Alistair Darling, this morning, the government will provide a £20bn loan until the mortgages are redeemed. The mortgages are mainly inherently riskier buy-to-let and self-certified products.
Darling said that taxpayers will not have to fund the bailout. If there is a shortfall in mortgage payments, then the balance of up to £15bn will be collected from the banking industry under the bank compensation scheme.
However, said Darling, in the event of such a shortfall, they money would not be collected from banks until the overall financial environment improves.
Defending the plan on Radio 4 this morning, Darling said: “To have let the Bradford & Bingley go down would have destabilised the whole system. The government has to provide this stability.”