H M Treasury

Financial Services Compensati

RNS Number : 5188E
H M Treasury
29 September 2008
 









29 September 2008






 










  RNS - FINANCIAL SERVICES COMPENSATION SCHEME


The FSCS has been triggered following the failure of Bradford & Bingley to meet its regulatory requirements and its declaration of default by the FSA, prior to the making of the Transfer Order.  


Under the Transfer Order, the FSCS has paid out approximately £14bn to enable retail deposits held in Bradford & Bingley and covered by the FSCS to be transferred to Abbey Santander. The Treasury has made a payment to Abbey Santander for retail deposit amounts not covered by the FSCS, amounting to approximately £4bn, to be transferred to Abbey Santander. In return, the FSCS and the Treasury have acquired rights in respects of the proceeds of the wind-down and realisation of the assets of the remaining business of Bradford & Bingley in public ownership.  


The FSCS has financed its payout through a short-term loan from the Bank of England, which it is intended will be replaced with a loan from the Government after a short period of time. The repayment terms of the loan for the first three years provide for repayment of interest at a rate of one-year LIBOR plus 30 basis points, plus the repayment of any recoverables accruing to the FSCS from the wind-down of the business against the principal outstanding. The first payment, for interest from the period from now until end-March 2009, will take place at end-September 2009 and subsequent payments will be made annually thereafter. It is currently estimated that the first payment required in September 2009 by the FSCS under the loan will be approximately £450 million. After the first three years, it is intended that the loan will be refinanced by the Treasury, repayments of the principal to be made over a period of years in the light of prevailing market conditions.  


The Chancellor of the Exchequer today confirms that the Government stands behind the FSCS, so it can be relied on to be able to play its role in meeting future claims that arise.  





 



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