New call for inquiry over Bradford & Bingley break-up (From Bradford Telegraph and Argus)

New call for inquiry over Bradford & Bingley break-up

12:20pm Tuesday 19th June 2012 in Business By Chris Holland, Business Reporter

Claims by an outgoing financial regulator that his plans to avert a run on the Northern Rock bank were ignored has led to renewed calls for an independent inquiry into the “deeply flawed” nationalisation and break-up of Bradford & Bingley.

Bradford & Bingley Action Group chairman David Blundell said comments by retiring Financial Services Authority boss Hector Sants raised more questions about B&B’s demise.

The mortgage bank’s mortgage book is now run by Crossflatts-based UKAR and the B&B branches and savings business were sold to Spanish-owned bank Santander at the height of the banking crisis in 2008.

Mr Blundell, who leads a campaign on behalf of around one million former B&B shareholders whose holdings were made worthless by the previous Labour Government’s decision to dispose of the business, said the move was “deeply flawed” and the most ‘inglorious’ event of the banking crisis.

Mr Blundell spoke out after claims by Mr Sants that the then Chancellor Alistair Darling and Bank of England Governor Sir Mervyn King ignored his idea of granting a loan to Lloyds TSB so it could buy the struggling Northern Rock bank.

Mr Sants said this would have prevented the run on Northern Rock’s branches which sparked off the UK banking crisis.

Mr Blundell said: “Nationalisation of B&B was indeed the most inglorious event during the UK banking crisis and Mr Sants’ failure to mention the FSA’s role in this frankly suggests selective memory syndrome.

“At the time of nationalisation B&B had in fact one of the strongest balance sheets of any UK banks. Relatively speaking, it was far stronger than Northern Rock, Lloyds TSB and Royal Bank of Scotland (RBS) and yet Mr Sants has failed to raise this. That suggests he recognises the management of the banking crisis has been an abject failure for which the Government and the tripartite regulatory authorities are responsible.”

Mr Blundell said the Government and regulators had repeatedly failed to give details of the sequence of events leading to B&B’s nationalisation.

He said: “Mr Sants’ intervention strengthens our view that the B&B nationalisation decision was deeply flawed and made in haste for political reasons, thus unnecessarily disadvantaging one million B&B investors. It provides further evidence to reinforce the action group’s demand for an independent inquiry into the banking crisis in which B&B investors have been the most obvious victims.”

Mr Sants said: “I think things would have been different if the Government and Bank of England had taken my recommendation that they should provide liquidity support to Lloyds to purchase Northern Rock.

“I think that would have made a difference, it would have avoided the queues and it would have changed the general climate in relation to the old building society sector that had moved into the banking sector.”