The European Commission today approved the British government’s rescue package to bail-out mortgage lender Bradford & Bingley.
Clearance under EU state aid rules was rushed through in less than a day instead of the months it usually takes Brussels to vet such measures for fair competition.
Commission and UK competition officials had been in contact over the weekend as the terms of the deal were hammered out, ensuring the EU formalities could be concluded quickly.
Today, having received the formal, detailed terms from London less than 24 hours earlier, EU Competition Commissioner Neelie Kroes announced the go-ahead.
She confirmed that the state aid measures designed to keep Bradford and Bingley afloat comply with EU rules on rescue aid.
And the UK government has pledged to submit to Brussels within six months details of a longer-term restructuring – or liquidation – plan. That will also have to be examined by the Commission under its strict rules on restructuring aid.
“This case shows that, with good co-operation from the member state concerned, the Commission can move extremely quickly to provide legal certainty for rescue measures.” said Ms Kroes.
“It demonstrates that state aid control is not an obstacle to protecting the interests of depositors and promoting financial stability. I look forward to continuing to work closely with the UK authorities during any discussions on the future of Bradford & Bingley.”
The Commission said the aid package was designed to “ensure financial stability, protect retail depositors and support the orderly winding down of Bradford & Bingley”.
The terms Brussels had to approve included Government measures effectively nationalising and winding down Bradford & Bingley, the sale of Bradford & Bingley’s retail deposit book and its 197 branches, along with a matching cash element, to Abbey National, and the provision of a “working capital facility” and guarantee arrangements to ensure an “orderly” winding-down of the parts of the bank not bought by Abbey National.
A Commission statement said: “The Commission’s assessment of these measures found that the state funding to enable the sale of the deposit book provided a state aid to Bradford & Bingley and to its retail deposit business that was sold.
“The Commission also concluded that the working capital facility and the guarantee arrangements provided by HM Treasury to Bradford & Bingley constitute state aid.
“On the other hand, the Commission found that the buyer of Bradford & Bingley’s retail deposit business received no aid, as it paid the market price. In addition the Commission is not concerned by potential advantages that these measures may have procured to Bradford and Bingley’s retail depositors, as aid to individuals is outside the scope of the EU state aid rules.”
The statement went on: “The measures described can be authorised as rescue aid in line with the EU guidelines on state aid for rescuing and restructuring or liquidating firms in difficulty.
“Under these rules, rescue aid must be given in the form of loans or guarantees lasting no more than six months, except when structural measures are urgently required, which was the case for Bradford & Bingley.
“Moreover, the UK authorities have given a commitment to submit a restructuring plan for Bradford & Bingley to the Commission by March 29, 2009.”
Bradford & Bingley had a 7.7% UK market share of net new mortgage lending at the end of last year.