Another bank gets nationalised

Earlier this year the financial headlines were filled with news about the government taking over the stricken bank Northern Rock. Over the past few days the government has used the same legislation that was used in the Northern Rock takeover to rush through the nationalisation of another troubled bank, Bradford & Bingley. According to reports the government will be taking on the £50 billion loan book of the troubled bank, much of which has been lent to buy to let investors, whilst the Spanish owned bank Santander, which also owns Abbey, takes on the savings account side of the business, said to be value at £20 billion.

However, news of the nationalisation has send bank shares plummeting, and following the news shares in major banks such as HSBC, Barclays, Royal Bank of Scotland, and Lloyds TSB plummeted. The FTSE 100 index fell by the largest level since the start of this year, closing at 4818 points down, which reflected a fall of 5.3%.

After announcing the nationalisation the Prime Minister, Gordon Brown, said that the fact that the government had taken action so quickly proves that it would “do whatever it takes to ensure the stability of the UK financial system.”

Officials from the Treasury stated: “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.”

An official from the Abbey, which has taken on the savings side of B&B said that consumers’ savings were safe. He said: “They can be certain that their hard-earned savings are with a bank they can trust.”

Tags: largest level, northern rock, stability, bradford & bingley, fact, Financial services, savings, bank