The Rise and Fall of Bradford and Bingley Plc

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GRADUATE CERTIFICATE IN BUSINESS FINANCIAL MANAGEMENT “THE RISE AND FALL OF BRADFORD & BINGLEY PLC” BY AIMA UNUIGBE 08178967 1641 WORDS MARION STORM 08/12/08 A building society is a financial organisation owned by its members as opposed to shareholders, whose main business was to provide mortgages to allow customers buy houses (UK Mortgage Guide, 2008). Bradford & Bingley plc (B&B) was originally a building society known as Bradford & Bingley Building Society which was created in 1964 when the Bradford Equitable and the Bingley Building Societies, decided to merge. It decided to demutualise into a bank in July 2000 when the members approved the Board of Directors application to become a shareholder-owned bank (B&B, 2008). On the 4th of December 2008, the building society was floated on the London Stock Exchange and became B&B plc. Abbey National, HBOS and Northern Rock (BSA, 2007) are a few of the ten building societies that demutualised into banks and none of them still exist as independent banks. According to Tayler (2003), building societies demutualise because members believe that they stand to make profits from retained earnings while managers stand to gain PLC type managerial perks such as remuneration pay and share options and also have the freedom to act and make financial decisions, with the aim to maximise profit. Firstly, this essay will discuss the effect that the global credit crisis had on Bradford & Bingley and why the bank struggled to recover. Then the different roles played by the Shareholders, Management, Texas Pacific Group, Financial Service Authority and the Bank of England will be examined. Next, parallels will be drawn between Northern Rock, another bank who fell to the perils of the credit crunch, and B&B. Finally, some conclusions will be drawn from the evidence about why B&B could not recover from the situation.

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