Bradford & Bingley is to be nationalised to prevent the bank collapsing. The government will take control of the bank’s mortgage and loan business.
Savers with Bradford & Bingley accounts are to have their money transferred to Abbey – owned by Santander – as part of the deal.
Some of the 200 high street branches of Bradford & Bingley are also expected to convert to Abbey branches.
Bradford & Bingley is registered with the Financial Services Authority (FSA), which meant that anyone with savings of up to £35,000 (£70,000 in a joint account) would have been fully protected by the Financial Services Compensation Scheme (FSCS) if the bank collapsed.
But the government decided to take action to avoid a repeat of the long queues that formed outside Northern Rock branches when customers rushed to withdraw funds.
Abbey and Alliance & Leicester
Santander owns Abbey and already has a FSA registration to protect holders of Abbey accounts. It recently took over Alliance & Leicester and is expected to maintain separate registrations for both brands going forward to protect Alliance & Leicester savers up to the same £35,000 level.
If this is the case, customers with £35,000 in Abbey accounts and another £35,000 in Alliance & Leicester accounts would be fully protected by the FSCS.
It is unclear at this stage whether Bradford & Bingley’s registration will still apply to these transferred accounts or whether the accounts will only be protected by Abbey’s FSA registration in future.
Bradford & Bingley buyout
Which? Money editor Martyn Hocking said: ‘The buyout will be a relief for anyone with a Bradford & Bingley savings account who was worried by the sharp fall in the bank’s share price. However, once the buyout is complete, Bradford & Bingley customers who already had accounts with Abbey may now wish to switch some of their money elsewhere.
‘If the total amount they have in these accounts (those held at B&B and at Abbey) exceeds £35,000, and Bradford and Bingley’s registration is no longer in force, consumers may need to switch some of their funds to a separate bank in due course to give them complete protection.
‘We need clarity from the FSA and Santander on the level of protection that applies to these savings.
Best Buy savings
‘Consumers also need to look carefully at the interest rates offered on their savings at Abbey. Bradford & Bingley savings accounts have featured regularly in recent Best Buy tables, with its Internet Saver 3 instant access account offering an outstanding 6.51% interest, and its Internet Notice Saver 1 and e-Isa 3 also rated Best Buys’.