A main cause of the banking crisis in Britain back in 2007/8 was the “gross misfeasance” of the UK Government and the regulatory authorities’ “failure to control greedy bankers”, according to the chairman of the Bradford & Bingley Action Group (BBAG), which has over the last nine years been campaigned for compensation for a million dispossessed shareholders in the UK bank and mortgage lender.
The comments from BBAG chairman David Blundell come ten years to the day (September 14, 2007), since the run on Northern Rock, the Newcastle mortgage lender, started and queues appeared outside its Moorgate branch in The City of London and Golders Green, north London.
Brokers in ‘The Square Mile’ had known for several months though that all was not well with the ‘Rock’, with supply of money from its retail and wholesale depositors drying up and putting in a perilous situation.
David Buik, a City veteran who works as a market commentator for Panmure Gordon, noted in the Evening Standard yesterday that when he worked for BGC Partners in 2007 the names of the Rock and subsequently Bradford & Bingley (B&B) “were always up there” on the whiteboard in the dealing-room wall for banks’ loans and deposit requests - “but never getting rubbed off.” Those City dealers saw it coming the demise of the banks coming early doors.
Now the decision to nationalize B&B back in September 2008 and “destroy it as an ongoing business” according to Mr Blundell was “made in haste and was inconsistent with the treatment of Royal Bank of Scotland and Halifax Bank of Scotland”, which he contended had far weaker balance sheets at the time.
It was in fact a decision that was made during a transatlantic phone call between the then Chancellor, Alistair Darling, to Prime Minister Gordon Brown, whilst he was in Washington, D.C. the weekend before B&B was nationalized. There was no cabinet discussion about the matter.
Simultaneously the Treasury sold the B&B savings book and branch network to Spain's Santander at a “fire sale price” and the Bank of England provided it with £22 billion (bn) of direct support. There is also “a suspicion” according to Leeds-based Blundell that the decision to support RBS and HBOS was done to cement the Labour party’s power base in Scotland.
Leeds-based Blundell, who has campaigned vigorously since late 2008 for the truth as to why the bank was nationalized, commenting said: “That decision caused significant financial and emotional suffering to nearly one million B&B employees, share/bond holders, most of whom were ‘just about managing’ retail investors.”
He added: “BBAG finds it astonishing that the UK Government supported Santander in this way, thus ensuring that B&B was destroyed as a viable business.”
During the nine years since the nationalization, B&B share/bond holders have made numerous Freedom of Information Act (FOIA) requests to the Cabinet Office, the Treasury and the Financial Conduct Authority, to no avail.
These departments resorted to “subterfuge and obfuscation on an industrial scale” he said, failing to reply to recorded delivery letters, making public statements, which he asserted “were untrue, destroying records, commercial sensitivity and ‘public interest’ to avoid telling the truth, which has made a mockery of the FOIA.”
In fact, in correspondence seen by Forbes that details the sequence of events to B&B’s demise, the action group wrote to Messrs Brown and Darling “at least a dozen times” between September 2008 and May 2010. Every communication - then and since - has according to Blundell been “either ignored or sidelined by successive governments including the Coalition and the current Government.”
Separately, David Buik in his Evening Standard comment this Wednesday referred to what he suspected as “…Gordon Brown’s rudderless tripartite of regulators - the Treasury, FCA and Bank of England” at the time of the Rock’s demise.
Thus far, the reasons successive governments have offered for the banking crisis “are risible” the Yorkshire-based campaigner said. “The spirit of Sir Humphrey Appleby [a character in the 1980’s BBC comedy ‘Yes Minister’] is alive and well in the corridors of Whitehall and Westminster,” he asserted.
Mr Blundell and Tim Lowden, deputy chairman of BBAG, have approached numerous MPs with a view to establishing an independent inquiry, preferably by Nicky Morgan, Chair of the Treasury Select Committee.
The Treasury committee since 2010 assumed new powers, which has included the right to veto appointments to the independent Office for Budget Responsibility, and forced the FSA to publish a detailed report over how it handled Royal Bank of Scotland’s collapse.
It is understood that two MPs in Yorkshire, Alec Shelbrooke, MP for Elmet & Rothwell, and Philip Davies, MP for Shipley, of which Bingley is part, and both active supporters of the BBAG campaign for many years, will also ask her to establish an inquiry.
BBAG understands that if the UK Government fails to respond adequately to FOIA requests, one can appeal to the European Union (EU).
On this score, Mr Blundell recently met his local MEP John Procter and a Reformists group member in Brussels earlier this month (4 September 2017), who was said to have “expressed astonishment” at the treatment to which B&B share/bond holders have been subjected and assured him that he would actively pursue this matter both nationally and with the EU. MPs Shelbrooke and Davies are to liaise with Mr Procter and support him in this endeavour.
The "stalling over information" sought by the action group as to the precise details around why the bank was nationalized is regarded in certain quarters as shocking. Rather than being bailed out and partially nationalized - as was the case with RBS, B&B’s fate seemed sealed and executed in haste for political reasons according to Blundell.
It might also reflect the ‘Too Big To Fail’ syndrome, a term popularized by U.S. congressman Stewart McKinney, where certain institutions (especially financial) are so large and interconnected that their failure would prove a disaster to the wider economy. If anything, B&B was too small to succeed. But the jury is out on that given its balance sheet strength prior to nationalization.
Back in December 2014 Blundell and another supporter of the campaign had been advised, in confidence, by a B&B director and a member of the Peter Clokey valuation team that there would be a substantial surplus when B&B was finally wound down.
Well, according to a 2013/14 annual report from UK Financial Investments Ltd, the body established as part of the British Government’s response to the banking crisis and responsible for managing the Government’s 100% shareholding in UKAR and its subsidiaries including B&B plc on behalf of the Treasury, it was revealed that: “As of 31 March 2014, total assets of Bradford & Bingley were £35.2bn, of which £30.2bn were loans and advances to customers.”
Earlier in 2012 it had been reported that: “All creditors including the Government are expected to be repaid in full by B&B plc and the company is forecast to yield an annual rate of return of 5% to 6% to the Treasury, which reflects a total investment of £27bn and a total return to the Government of circa £49bn.”
BBAG had suggested two years ago that the level of compensation sought for dispossessed shareholders was “between 55p and 100p” a share, which would equate to between £339.9m and £618m based on the number of B&B shares cited as being issued from the bank’s 2007 annual report and accounts. Their subsequent rights issues would take this number higher towards the £1bn mark.
Compared to the £22bn of direct support the Bank of England’s provided after the Treasury sold B&B’s savings book and branch network to Santander that might be considered modest compensation for the pain and suffering that nearly one million 'just about managing' retail investors suffered. Whatever the outcome of the campaigners approach to the EU the whole matter around the B&B saga highlights the neglect afforded to shareholders, many of whom were pensioners.
For more information about the Bradford & Bingley Action Group’s campaign see their website (www.bbaction.com) and/or telephone +44 (0)113 2813941.
