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Kaupthing Singer & Friedlander Limited (Determination of Compensation) Order 2008

I no doubt stand corrected by the noble Lord. I well remember listening to his interview with a member of the local government community on the ““Today”” programme, an interview in which the noble Lord came out the clear winner. I turn to the points raised by the noble Lord, Lord Blackwell. He said that he wishes for assurance that it is the Government’s intention that shareholders will be treated fairly. I confirm that that is our intention. I also confirm—and I believe that in so doing I will address the points raised by the noble Viscount, Lord Eccles—that the noble Lord’s understanding is correct: the problem at Bradford & Bingley was not one of capital adequacy but one of liquidity. The bank was experiencing the early stages of a run, as reported by the chairman of Bradford & Bingley, Mr Pym, in his evidence to the Treasury Select Committee. The noble Lord, Lord Blackwell, welcomed the appointment of an independent valuer and the valuation assumptions that are to be used. He asked for confirmation that the wording of the valuation assumptions was ““significant and intentional””. I am pleased to give such confirmation. He also asked that I should make clear that there should no presumption that there was no value in the shares of Bradford & Bingley, and I am similarly pleased to give such confirmation. I cannot anticipate the evidence that HMT or the other tripartite bodies might give to the valuer in support of the valuer’s process. The noble Lord, Lord Blackwell, mentioned that institutional shareholders had volunteered a willingness to appoint a non-executive director to the board of Bradford & Bingley. The Committee will be aware that it is intended that the shareholding in Bradford & Bingley should be placed under the supervision of UK Financial Investments, which will have a largely independent non-executive board drawn from people with appropriate experience in the private sector. I believe that that body will perform the function that the institutional investors had in mind. I believe that I have answered, or have gone as far as I can in answering, the points raised by the noble Viscount, Lord Eccles. The problems facing Bradford & Bingley represented a serious threat to financial stability. This was a large banking institution that was experiencing a run, the details of which have already been provided to the other place. A number of other options were considered by the board of Bradford & Bingley and the Government. The Committee will be aware that Bradford & Bingley explored a number of options with its own shareholders, with a group of institutional shareholders who were willing to increase their shareholding in the company and with a private equity group called TPG. None of those routes provided a satisfactory solution to a situation that was driven, in the end, by liquidity problems rather than problems of capital adequacy.