B&B shareholders revolt

6 October 2008

Angry Bradford & Bingley shareholders are demanding an investigation into the bank’s nationalisation amid concerns that they will receive no compensation.

The bank has around one million shareholders, of whom 930,000 are private investors. On Friday 26 September, Bradford & Bingley closed at 20p per share on the London Stock Exchange but following the weekend’s decision to nationalise the bank, by Monday each share was effectively worth nothing.

The UK Shareholders Association (UKSA), which represents the interests of such investors, has declared its opposition to the nationalisation and will ask the City watchdog, the Financial Services Authority (FSA), to conduct an investigation.

Its concerns stem largely from the bank’s recent rights issue, which many shareholders took up believing that the long-term future of the firm was secure. Back in July, 93% of investors voted in favour of Bradford & Bingley's £400 million cash call, yet less than three months later they have been left with nothing.

Roger Lawson, communications director at the UKSA, is concerned that the information given to shareholders to encourage them to buy more shares was misleading. He also questions how the financial position of the bank deteriorated so quickly following the rights issue.

Lawson says: “Shareholders should expect very little, if anything, in compensation. This ‘fire sale’ of the company's assets is clearly disadvantageous to shareholders and is allegedly justified based on a breach of the FSA rules for deposit takers, but no details of those breaches have been provided.”

During a recent session in the House of Commons, chancellor Alistair Darling was asked what would happen to “loyal” Bradford & Bingley shareholders as a result of the nationalisation.

Darling refused to be drawn, stating it was “impossible” to say what – if anything – will happen to shareholders down the line.

“We will do what’s right,” he added. However, the chances of compensation do look slim.

Darling pointed out that Bradford & Bingley’s mortgage assets will take years to be realised, and it is not yet known how much money they will even bring in.

With the Treasury and the Financial Services Compensation Scheme borrowing money from the Bank of England in order to transfer Bradford & Bingley’s saving business to Santander, it will certainly be some time before anyone sees any money made of the nationalisation of the building society turned bank.

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