State aid to help the liquidation of Bradford & Bingley would not break competition rules, the European Commission has ruled.
Government plans for the liquidation of Bradford & Bingley (B&B), and the restructuring of Dunfermline Building Society, has been approved by European Commission Competition Commissioner Neelie Kroes.
The liquidation plans will ensure an orderly winding down of B&B while maintaining financial stability, the European Commission (EC) says.
Support measures approved by the EC included a working capital facility and guarantee arrangements to ensure units of the bank earmarked for liquidation are closed in an orderly fashion.
As the lender is no longer active apart from serving its existing customers there was a limited impact on competition, while asset sales could be speeded up when market conditions improve, it ruled.
Strictly monitoring of the progress of the wind-down process and its impact on competition will be part of the deal.
Kroes says: "The UK authorities' market-oriented solution has avoided any disproportionate distortions of competition while enabling the preservation of the viable parts of the business".
The EC also approved state aid to support the restructuring of the Dunfermline Building Society, including a £1.5bn subsidy to support the part-sale to Nationwide Building Society and a working capital loan of £10bn.
The Dunfermline restructuring will divide the society into two entities, split between good assets and impaired assets.
The EC decision means the state aid will not need to be repaid.
Aid was limited to what was "necessary", and that the distortion of competition caused by the aid was limited because of the profound restructuring, according to the EC.
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