---

TOPICAL DEBATES Financial Stability

I will come to the position of the Icelandic banks in a moment, but I wanted first to update the House on the range of issues that have emerged. If there are losses at the end of the wind-down of Bradford & Bingley, the cost will be met first by Bradford & Bingley shareholders and subordinated debt-holders. The financial sector and the Treasury will then share any further losses between them. It is anticipated that the financial sector will bear a significant proportion of any such further losses from future profits when financial markets return to normal. It would require some £4 billion of impairments on the mortgage assets before the Treasury and the taxpayer suffered significant losses. Moody's credit rating agency estimates that asset impairments will amount to about £1.2 billion. We are confident that, through quick and decisive action, we are doing whatever it takes to stabilise the financial system in the UK while protecting the taxpayer. Savers at Bradford & Bingley are now savers at Abbey, with the assurance of their deposits being with a major bank. Savings can be accessed in the usual way and remain covered by the financial services compensation scheme. Bradford & Bingley's branches, call centres and internet operations continue to be open for business as usual. The Government have also guaranteed that for those working in Bradford & Bingley's headquarters, there will be no compulsory redundancies over the next six months, employee terms and conditions will remain unchanged, and pension rights will be protected. On the issue that the hon. Member for Hornchurch (James Brokenshire) just pressed me on, acting yesterday on the advice of the Bank and the Financial Services Authority, and in light of recent announcements by the Icelandic authorities, the Chancellor took action to protect retail depositors in three Icelandic banking operations in the UK: Icesave, which is a UK-based branch of Landsbanki; Heritable, which is a UK-based banking subsidiary of Landsbanki; and Kaupthing, Singer and Friedlander, which is a UK-based banking subsidiary of Kaupthing bank. That action was taken to ensure stability of the UK financial system and savers' money is now safe and secure.