10/08/2008

I don't mind bailing out UK banks, but why are we bailing out Spanish banks too ?


I can see all the reasons why the government has felt the need to bail out HSBC, Lloyds TSB, Barclays, Standard Chartered, RBS, HBOS and Nationwide. After all, they are all UK banks, pay UK corporation tax and are UK owned.

The big question for me is, why are we bailing out Abbey, which is part of the Spanish banking giant Santander, which Alistair Darling was claiming was relatively chas rich on the radio this morning ? On Radio Five Live Mr Darling hailed the way the government had dealt with Bradford and Bingley, where a strong foreign bank (Santander) stepped in. However, at the same time the British Government's rescue plan seems to involve UK tax payers bailing out Abbey.

Shouldn't the Spanish Government step in to guarantee Spanish banking giants or am I missing the bleeding obvious ?

8 comments:

Starls said...

I'm guessing the option is there - although if they are cash rich I'm sure they wouldn't want to.

Given the harsh restrictions outlined to any banks signing up to the bail out (on bonuses etc) then I'm sure they'd have to be desperate if they did.

(you could ask the same question of the Icelandic banks whih are cash strapped but we are still guaranteeing)

Norfolk Blogger said...

There is a difference between using the FSA's guarante schem to protect UK depositors money in Icelandic Banks (which may not be needed now as IceBank's personal savers assetts have been transferred to ABN AMRO), and the british government's willingness to bail out a foreign bank (and foreign savers).

John said...

Because this isn't about bailing out banks, really. It's about ensuring cheaper mortgages, another house price boom, and an election win.

Cash for Santander is meant to equal cheaper, higher LTV, bigger salary multiple Abbey mortgages.

It won't work, but that's the game.

marksany said...

when you have foreign ownership they just aren't as committed to our market. If it all goes tits up, they can withdraw to their home market to weather it out, leaving us with nothing. This is why it is such a bad idea to sell all your utilities, infrastructure and primary industry to foreigners. In bad times, they'll hop it.

Anonymous said...

Makes one wonder whether we should nationalise all UK banks provided we could find some one intelligent enough to run the New B of E

The Half-Blood Welshman said...

I think this is more probably keeping their options open in case of future need. After all, the question has to be asked that if Santander does get into trouble, which so far it fortunately hasn't, will Madrid be able to save it, given the bank's size and the relatively small Spanish economy, which I might point out is also having a house price crisis?

In which case it would probably be cheaper for our government to simply rescue Abbey over here from the adminstrators, rather then endlessly try and wrangle with Spain over deposit guarantees as they are with Iceland (incidentally we'll never see that money again - for all the Chancellor's bluster you can't seize money that doesn't exist).

Anonymous said...

I think two stories have got confused here.

The government should say it will support Abbey (the UK part of Santander) even if Santander is, as I expect it to be, cash rich. Santander - through Abbey, Alliance and Leicester, and Bradford and Bingley - is now a serious player in the UK retail banking market. Any suggestion that deposits with these institutions are under threat would worsen wider confidence in our banking system.

This is not the same as 'bailing out' the bank.

I'm afraid, in this instance, you are missing the bleeding obvious.

Oh, and Kaupthing's UK savers assets have been bought by ING (ABN Amro has ceased to exist in all but technicalities in the UK).

Steve said...

Are you sure the bail-out applies to Nationwide?

It's still a mutual and, as far as I know, hasn't been exposed to toxic debt in anywhere near the same way as the banks.

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