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UK government to merge Northern Rock and Bradford & Bingley loan books

Today the UK government received approval for its intervention which effectively prevented the collapse of the Bradford & Bingley back in 2008. The European Commission has today confirmed that the UK government acted within the rules and regulations and has been given the go-ahead to restructure what is left of the Bradford & Bingley operation, i.e. the company's loan book. So what plans has the government got for the Bradford & Bingley loan book?

While nothing has been officially confirmed it seems almost inevitable that what is left of Northern Rock (i.e. the "bad bank" operation) and the Bradford & Bingley loan book will be merged to create a larger "bad bank" operation. The idea is that the UK government will target a 10 year period to wind down the more difficult loans associated with Northern Rock and the Bradford & Bingley and try to reduce any potential taxpayer losses.

The problem for the UK government is the fact that many of the loans which have been left with the authorities may well have to be written off in due course. However, as we approach the next general election, the opportunity to effectively kick this issue into the "long grass" will be welcomed by the authorities because by the time the potential losses on the loan books start to come through the next government will be in office.

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