EU approves aid to two UK banks
Commission accepts that aid to help the liquidation of Bradford & Bingley and the restructuring of Dunfermline Building Society would not harm competition.
The European Commission today approved two separate packages of aid provided by the UK government to troubled financial institutions Bradford & Bingley and Dunfermline Building Society.
The Commission’s decision allows the UK government to support Bradford & Bingley during the process of splitting up the state-owned bank.
The government rescued Bradford & Bingley from collapse at the height of the financial crisis in October 2008 and has since decided to sell parts of the business and liquidate the remainder over the next decade.
Neelie Kroes, the European commissioner for competition, said she was confident that the UK measures would not lead to “any disproportionate distortions of competition while enabling the preservation of the viable parts of the business”.
The support measures approved by the Commission include a working capital facility and guarantee arrangements intended to ensure that those units of the bank earmarked for liquidation are closed in an orderly fashion.
The Commission said that it would “strictly monitor the progress of the wind-down process and its impact on competition”.
Before the crisis and its subsequent nationalisation, Bradford & Bingley was a major player on the UK’s mortgage market, with 7.7% of the market for new mortgage lending at the end of 2007.
The government sold Bradford & Bingley’s retail deposit book and retail branches in September 2008 to a rival, Abbey National. Abbey National has been a subsidiary of the Spanish bank Santander since 2004 and re-branded itself as Santander this month.
Aid to Dunfermline Building Society
In a separate decision, the European Commission today approved state aid given by the UK government to support the restructuring of the Dunfermline Building Society.
The aid included a £1.5 billion (€1.7bn) subsidy to support the sale of part of Dunfermline to Nationwide Building Society and a working capital loan of £10bn (€11.39bn). The Commission decision means this state aid will not need to be repaid.
The Commission said that the aid had been limited to what was necessary, and that “the distortion of competition caused by the aid was limited because of the profound restructuring”.
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